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                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

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

                                    FORM 10-K

                  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                   FOR THE FISCAL YEAR ENDED DECEMBER 31, 2006

                        COMMISSION FILE NUMBER: 000-22194

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

                                    SPSS INC.
             (Exact name of registrant as specified in its charter)


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<S>                                      <C>

                DELAWARE                                36-2815480
    (State or other jurisdiction of                   (IRS Employer
     Incorporation or organization)                Identification No.)
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                  233 S. WACKER DRIVE, CHICAGO, ILLINOIS 60606
              (Address of principal executive offices and zip code)

               REGISTRANT'S TELEPHONE NUMBER INCLUDING AREA CODE:
                                 (312) 651-3000

           SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:


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<Caption>
                                             NAME OF EACH EXCHANGE ON WHICH
          TITLE OF EACH CLASS                          REGISTERED
          -------------------                ------------------------------

<S>                                      <C>

   Common stock, par value $0.01 per             The Nasdaq Stock Market
                 share
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           SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
                                      NONE

     Indicate by check mark if the registrant is a well-known seasoned issuer,
as defined in Rule 405 of the Securities Act Yes [ ]     No [X]

     Indicate by check mark if the registrant is not required to file reports
pursuant to Section 13 or Section 15(d) of the Act Yes [ ]     No [X]

     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 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]

     Indicate by check mark whether the registrant is a large accelerated filer,
an accelerated filer, or a non-accelerated filer. See definition of "accelerated
filer and large accelerated filer" in Rule 12b-2 of the Exchange Act (Check
one):
Large accelerated filer [ ]     Accelerated filer [X]     Non-accelerated
                                    filer [ ]

     Indicate by check mark whether the registrant is a shell company (as
defined in Rule 12b-2 of the Exchange Act).  Yes [ ]     No [X]

     The aggregate market value of the registrant's voting stock held by non-
affiliates of the registrant on June 30, 2006 (based upon the per share closing
sale price of $32.14 on such date, and, for the purpose of this calculation
only, the assumption that all of the registrant's directors and executive
officers as of such date are deemed to be the affiliates) was approximately
$614.4 million.

     The number of shares outstanding of the registrant's Common Stock, par
value $0.01, as of February 15, 2007, was 19,814,237.

                       DOCUMENTS INCORPORATED BY REFERENCE

     Part III of this Annual Report on Form 10-K incorporates by reference
portions of the registrant's Proxy Statement for its 2007 Annual Meeting of
Stockholders to be held on April 26, 2007.

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                                    SPSS INC.

                                TABLE OF CONTENTS



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<S>        <C>                                                                 <C>

                                       PART I
Item 1.    Business.........................................................     2
Item 1A.   Risk Factors.....................................................    10
Item 1B.   Unresolved Staff Comments........................................    15
Item 2.    Properties.......................................................    15
Item 3.    Legal Proceedings................................................    15
Item 4.    Submission of Matters to a Vote of Security Holders..............    16
                                      PART II
Item 5.    Market for Registrant's Common Equity, Related Stockholder
           Matters and Issuer Purchases of Equity Securities................    17
Item 6.    Selected Financial Data..........................................    18
Item 7.    Management's Discussion and Analysis of Financial Condition and
           Results of Operations............................................    19
Item 7A.   Quantitative and Qualitative Disclosures About Market Risk.......    32
Item 8.    Financial Statements and Supplementary Data......................    33
Item 9.    Changes in and Disagreements with Accountants on Accounting and
           Financial Disclosure.............................................    70
Item 9A.   Controls and Procedures..........................................    70
Item 9B.   Other Information................................................    70
                                      PART III
Item 10.   Directors, Executive Officers and Corporate Governance...........    71
Item 11.   Executive Compensation...........................................    71
Item 12.   Security Ownership of Certain Beneficial Owners and Management
           and Related Stockholder Matters..................................    71
Item 13.   Certain Relationships and Related Transactions, and Director
           Independence.....................................................    73
Item 14.   Principal Accountant Fees and Services...........................    73
                                      PART IV
Item 15.   Exhibits and Financial Statement Schedules.......................    73
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                                        1

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                                    SPSS INC.

                             FORM 10-K ANNUAL REPORT
                   FOR THE FISCAL YEAR ENDED DECEMBER 31, 2006

                                     PART I

FORWARD-LOOKING STATEMENTS

THIS ANNUAL REPORT ON FORM 10-K CONTAINS FORWARD-LOOKING STATEMENTS WITHIN THE
MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933 AND SECTION 21E OF THE
SECURITIES EXCHANGE ACT OF 1934, INCLUDING, WITHOUT LIMITATION, STATEMENTS
REGARDING THE COMPANY'S EXPECTATIONS, BELIEFS, INTENTIONS OR FUTURE STRATEGIES
THAT ARE SIGNIFIED BY THE WORDS "EXPECTS," "ANTICIPATES," "INTENDS," "BELIEVES,"
"ESTIMATES" OR SIMILAR LANGUAGE. ALL FORWARD-LOOKING STATEMENTS INCLUDED IN THIS
DOCUMENT ARE BASED ON INFORMATION AVAILABLE TO SPSS ON THE DATE HEREOF. SPSS
CAUTIONS INVESTORS THAT ITS BUSINESS AND FINANCIAL PERFORMANCE AND THE MATTERS
DESCRIBED IN THESE FORWARD-LOOKING STATEMENTS ARE SUBJECT TO SUBSTANTIAL RISKS
AND UNCERTAINTIES, INCLUDING THE RISKS DESCRIBED UNDER ITEM 1A, "RISK FACTORS."
BECAUSE OF THESE RISKS AND UNCERTAINTIES, SOME OF WHICH MAY NOT BE CURRENTLY
ASCERTAINABLE AND MANY OF WHICH ARE BEYOND THE COMPANY'S CONTROL, ACTUAL RESULTS
COULD DIFFER MATERIALLY FROM THOSE PROJECTED IN THE FORWARD-LOOKING STATEMENTS.
DEVIATIONS BETWEEN ACTUAL FUTURE EVENTS AND THE COMPANY'S ESTIMATES AND
ASSUMPTIONS COULD LEAD TO RESULTS THAT ARE MATERIALLY DIFFERENT FROM THOSE
EXPRESSED IN OR IMPLIED BY THE FORWARD-LOOKING STATEMENTS. SPSS DOES NOT INTEND
TO UPDATE THESE FORWARD-LOOKING STATEMENTS TO REFLECT ACTUAL FUTURE EVENTS.

ITEM 1.  BUSINESS

     SPSS Inc., a Delaware corporation ("SPSS" or the "Company"), was
incorporated in Illinois in 1975 under the name "SPSS, Inc." and was
reincorporated in Delaware in 1993 under the name "SPSS Inc." SPSS is a global
provider of predictive analytics technology and services.

     The Company's offerings connect data to effective action by enabling
decision makers to draw reliable conclusions about current conditions and future
events. Predictive analytics leverages an organization's business knowledge by
applying sophisticated analytic techniques to enterprise data. The insights
gained through the use of these techniques can lead to improved business
processes that increase revenues, reduce costs and prevent fraudulent
activities.

     Many organizations focus on developing and retaining relationships with
people, particularly in their roles as customers, employees, patients, students
or citizens. To accomplish these goals, such organizations collect and analyze
data related to people's actions, attributes and attitudes. Since its inception,
SPSS has specialized in the analysis of such information about people,
developing technology and services that incorporate decades of related "best
practice" predictive analytic processes and techniques.

     SPSS provides two classes of software and service offerings to two distinct
audiences. For analysts proficient in the use of data analytic methods, the
Company offers statistical, data mining and business intelligence software tools
to examine and predict from a broad range of enterprise data. For business
people acquainted with, but not proficient in, data analysis techniques, SPSS
delivers predictive deployment solutions that embed the power of predictive
analytics directly into particular business processes, thereby enabling the
widespread use of the power of prediction and an increased return on investments
in information technology.

     SPSS sells its short sales cycle offerings through telesales and its long
sales cycle offerings through field sales organizations configured
geographically and by vertical industries. The Company's primary targeted
vertical

                                        2

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industries include the insurance industry, the financial services industry, the
market research industry and the public sector.

     Approximately two-thirds of the Company's revenues come from commercial
firms, many of which use SPSS technology to improve the profitability and
effectiveness of their organizations by attracting new customers more
efficiently, increasing the value of existing customers through improved cross-
selling and retention, and detecting and preventing fraud. Among its government
customers, SPSS offerings are primarily used to improve interactions between
public sector agencies and their constituents or detect forms of non-compliance.
At colleges and universities, SPSS statistical and data mining tools are often
standards for teaching data analysis techniques and academic research.

     SPSS has been a publicly traded company since the completion of its August
1993 initial public offering of common stock. SPSS common stock is listed on the
NASDAQ Stock Market under the symbol "SPSS." In addition to the information
contained in this report, further information regarding SPSS can be found on the
Company's website at www.spss.com. The information on the Company's website is
not incorporated into this annual report. The Company's annual reports on Form
10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all
amendments to those reports filed or furnished pursuant to Section 13(a) or
15(d) of the Securities Exchange Act of 1934 are made available, free of charge,
on the Company's website, www.spss.com, as soon as reasonably practical after
the reports have been filed with or furnished to the Securities and Exchange
Commission.

OUR INDUSTRY

     Predictive analytics is a set of procedures and related technologies that
applies sophisticated analytic techniques to enterprise data. When combined with
an organization's business knowledge, predictive analytics can lead to actions
that demonstrably improve critical business processes, including those that
directly affect how people act as customers, employees, patients, students and
citizens.

     The use of predictive analytics begins by exploring how an organization's
business problems can be addressed through an examination of data pertaining to
the organization's various internal processes or describing characteristics,
attitudes, and behavior of the people with whom the organization interacts.
These numeric and text data sets, which originate from both internal systems and
third-party providers, are cleaned, transformed, and evaluated using
statistical, mathematical, and other algorithmic techniques. These techniques,
often in conjunction with advanced visualization capabilities, then generate
models for classification, segmentation, forecasting, and propensity scoring, as
well as the detection of patterns and anomalies. The results of these models can
be used to determine which actions produce optimal outcomes. The results can be
delivered as recommendations to people and customer-facing systems that can take
effective action. Such actions include identifying new revenue opportunities,
finding measurable cost savings, identifying repeatable process improvements and
detecting fraud.

     The predictive analytics market emerged as a growing number of commercial,
government and academic organizations discovered and experienced the benefits of
using applied analytics. This market developed with the convergence of two
aspects of the software industry -- statistical tools and data mining -- which,
in turn, combined with new deployment technologies to create a third market
known as predictive deployment solutions.

     Statistical Tools.  SPSS is a leading provider of statistical software
tools. Statistical software tools have been and remain an integral part of the
Company's overall business.

     Data Mining Tools.  Data mining tools extend predictive analytics by
introducing an array of algorithms that could, under certain conditions, predict
outcomes more effectively than traditional statistical techniques. SPSS is a
leading provider of data mining tools.

     Predictive Deployment Solutions.  Predictive deployment solutions are a
synergistic combination of statistical tools, data mining tools and new
technologies (such as scoring engines, rules and optimization techniques) that
can be harnessed to implement real time decision making. Predictive deployment
solutions are an important driver of future growth of the Company's business.
Business process applications such as enterprise feedback management (EFM)
systems, customer relationship management (CRM) and enterprise resource planning
(ERP) create an environment where the predictive analytic applications are able
to provide significant return on investment by improving the performance of
these underlying systems.


                                        3

<PAGE>

STRATEGY

     The Company's strategy is to dominate the predictive analytics market by
continuing its focus on data about people. SPSS will seek to achieve this goal
by integrating the Company's predictive tools into an inter-operable product
suite that builds upon its predictive architecture. The Company will use the
resulting software platform to deploy predictive analytics within software
applications focused on attractive vertical markets.

     SPSS applies the Company's predictive analytic know-how to measure people's
attitudes and behavior to achieve desired outcomes and deliver usable content
with measurable value to the Company's clients.

MARKETS

     SPSS targets the following markets defined by International Data
Corporation (IDC) in its research reports entitled Worldwide Business
Intelligence Tools 2006-2010 Forecast, Worldwide Business Intelligence Tools
2005 Vendor Shares, Worldwide CRM Analytic Applications 2006-2010 Forecast, and
Worldwide CRM Analytic Applications 2005 Vendor Shares:

     - The global market for "Advanced Analytics" tools, a new IDC sector that
       consolidates the former sectors of statistical software and data mining
       software. In 2005, this market was approximately $1.15 billion in size
       with SPSS holding approximately 13% of its market share. IDC estimates
       that this market will increase by approximately 10% per year and reach
       approximately $1.9 billion in size by 2010.

     - The global market for analytical customer relationship management (CRM)
       applications. In 2005, this market was approximately $1.14 billion in
       size with SPSS holding approximately 3% of its market share. IDC
       estimates that this market will increase by approximately 10% per year
       and reach approximately $1.8 billion in size by 2010.

     In 2005, these target markets, combined, represented approximately $2.3
billion in revenue with SPSS holding approximately 10% of the total market
share. IDC estimates that these two target markets, together, will represent a
total of approximately $3.7 billion in revenues by 2010.

OFFERINGS

     SPSS provides its predictive analytic technology as tools for research
analysts and its applications for business people. SPSS has historically
operated with very little backlog because its tools and applications are
generally shipped as orders are received.

  PREDICTIVE TOOLS

     SPSS software tools enable customers to access and prepare data for
analysis, develop and deploy predictive models and generate reports and graphs
to present the results. In 2006, the Company began the process of streamlining
the tools offerings into an integrated suite of products. Today there are three
families of products that fit under the Predictive Tools umbrella. These three
product families are described below. Together, the Predictive Tools represented
71%, 75% and 76% of total revenue in 2004, 2005 and 2006, respectively.

     In general, the Company's predictive tools are:

     - Comprehensive in function, spanning the entire process of data analysis;

     - Modular, allowing customers to purchase only the functionality they need;

     - Integrated, enabling the use of various parts of the SPSS technology in
       combination to tackle particularly complex problems;

     - Tailored to desktop operating environments for greater ease-of-use,
       including browser-based environments for the delivery of results;


                                        4

<PAGE>

     - Available on most popular computing platforms; and

     - For some products, translated and localized for use in France, Germany,
       Italy, Poland, Japan, Taiwan, Korea, China and Spanish-speaking
       countries.

     Statistics Family.  The Company's primary statistical tools are part of its
flagship SPSS product line. These tools are modular in nature and designed for
use by research analysts working in a wide variety of commercial, governmental,
and academic organizations. While varying by version and computing platform, a
typical purchase from the SPSS product line includes an SPSS Base product and
related optional add-on modules. The SPSS Base includes the user interface, data
connectivity, data editing, reporting, graphing, and general statistical
capabilities. Add-on modules require the SPSS Base to operate and become
seamlessly integrated with SPSS Base upon installation. These optional offerings
usually provide additional statistical functionality specific to particular
types of analysis.

     Data Mining Family.  The Data Mining Family primarily consists of the
Clementine data mining workbench with optional add-on modules for text mining
and predictive web analytics. These products feature process-oriented visual
user interfaces and artificial intelligence-based algorithms. In 2006 products
from the Company's Data Mining Family and Statistics Family were integrated with
the release of Clementine 11 which allowed the Data Mining Family to gain
additional data transformation, analytical functionality and data visualization
capability from the Statistics Family.

     Business Intelligence Family.  The Business Intelligence Family consists of
the ShowCase product line. ShowCase products support information access, data
warehousing, on-line analytical processing (OLAP) and other analytical
applications for the IBM eServer iSeries (AS/400) computer market.

  APPLICATIONS

     Applications combine pre-defined access to the data, user interfaces that
capture the business process flow and the relevant predictive analytics required
to solve particular business problems. The Company's applications offerings
represented 15%, 14% and 14% of total revenue in 2004, 2005 and 2006,
respectively. SPSS applications include:

     Predictive Deployment Solutions.  The Company's deployment solutions
combine SPSS tools with deployment technologies and services to apply predictive
analytics in business operational systems. These deployment solutions consist of
both pre-packaged applications such as PredictiveMarketing and PredictiveClaims
and more custom-configured solutions that would combine a series of predictive
tools to create a customized offering. In general, these deployment solutions
seamlessly integrate with operational software from other vendors to provide
predictive capability to business users in their management of that operational
system. Examples of business areas in which these applications are used include,
but are not limited to, marketing campaigns, programs to improve call center
effectiveness or efforts to identify fraudulent activity in the insurance claims
processes.

     Enterprise Feedback Management.  Large corporations are increasingly
finding the need to gather feedback from customers and employees and to use such
feedback to better manage their businesses. Surveys have emerged as one of the
best mechanisms for gathering and understanding this feedback. The Company's
enterprise feedback management (EFM) offering, Dimensions, is a robust
technology platform that supports the complete end-to-end survey process.
Dimensions is also an industry standard for firms in the market research
industry. Dimensions provides seamless and efficient work processes around
surveys, easier analysis of data, and more dynamic means of delivering results
to clients.

SERVICES

     To support its applications, SPSS offers consulting and customization
services to assist in new implementations or configure existing applications to
vertical industry and customer requirements. SPSS consultants also help
organizations develop plans that align analytical efforts with organizational
goals, assist with the collection and structuring of data for analysis, and
facilitate the building of predictive analytic models. Services represented
approximately 14%, 11% and 10% of total revenue in 2004, 2005 and 2006,
respectively.


                                        5

<PAGE>

     To support the implementation of its software tools, SPSS offers a
comprehensive training program with courses covering product operations, general
data analytical concepts and processes, as well as the manner in which
statistical and data mining techniques can be applied to address particular
business problems. These courses are regularly scheduled in cities around the
world or organizations can contract with the Company for on-site training
tailored to their specific requirements. Courseware will also be made available
to SPSS partners and integrators, which will increase potential capacity for
delivering customer solutions.

     SPSS has a worldwide customer service and technical support infrastructure
that engages with customers on-site or by telephone, fax, mail, e-mail and the
Web. Technical support is provided to all licensees and includes assistance in
software installation and operations as well as limited guidance in the
selection of analytical methods and the interpretation of results. Additional
technical support services are available on a time-and-materials basis.

SALES AND MARKETING

     The Company has a long-established worldwide telesales organization that
largely sells SPSS tools to research analysts. Sales made by the telesales
organization are typically driven by direct mail campaigns and customer
references, completed within thirty days and average about $2,500 per
transaction. The database of existing SPSS customers provides an efficient
source for selling add-on products, upgrades and training. SPSS continues to
expand the scope of offerings sold through its telesales organization to
encompass most short sales cycle transactions. The Company maintains a network
of over forty distributors around the world to increase its penetration into
smaller international markets.

     The SPSS field sales force sells the Company's long sales cycle tools and
applications to enterprise customers. This field sales force is organized by the
Company's primary targeted vertical industries, including the insurance
industry, the financial services industry, the market research industry and the
public sector. SPSS field sales personnel engage with line-of-business
executives and information technology professionals to identify organizational
problems that SPSS offerings can address. In many situations, SPSS professional
services personnel are also involved to complete procurements and plan
implementations. The field sales force has partner relationships with other
leading companies to participate in mutually beneficial joint sales
opportunities or provide additional application implementation capabilities.
Transactions completed by SPSS field sales personnel typically take from nine to
eighteen months and range in value from $50,000 to $500,000 per transaction.

     SPSS maintains a worldwide infrastructure to support these sales
organizations. In addition to its headquarters in Chicago, the Company has
offices in the United States in the following metropolitan areas: New York City,
Washington D.C., Cincinnati and Rochester (MN). SPSS international operations
consist of thirteen offices in Europe and the Pacific Rim. Transactions are
customarily made in local currencies.

     The SPSS field marketing organization is charged with generating qualified
leads for the Company's tools and applications through direct mail, e-mail,
prospect seminars, advertising in trade and market-specific publications,
exhibiting at trade shows, and conducting user group meetings. This organization
also continually analyzes the SPSS customer database to identify likely
prospects for the Company's new offerings.

     SPSS has two marketing groups focused on products, one of which is devoted
to product management and the other of which is to product marketing. The
product management group is charged with building the products. Their tasks
include translating customer needs into clear directives for specific product
development projects, and working with the software engineering organization to
develop "roadmaps" that chart the future direction of each product family. The
product marketing group is responsible for delivering the products to the
customers. The product marketing group focuses on actively engaging with the
sales force in customer situations, understanding the current and future needs
of customers, and understanding the markets and competitors for each product
family.

     SPSS also has a corporate communications group responsible for the broad
visibility of the Company. This group works with the trade and financial press,
industry analysts and financial analysts to establish the identity and presence
of the Company as an industry leader. The SPSS corporate communications group
also supports other important areas of Company visibility, including the
development of expert reviews of SPSS tools and applications which appear in
trade and market-specific publications, and participation in professional
association meetings.


                                        6

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RESEARCH AND DEVELOPMENT

     SPSS plans to develop new software technologies and products, enhance
existing software technologies and products, acquire complementary technologies,
and form partnerships with third parties providing particular software
functionality or with domain expertise essential to serving selected vertical
industries. SPSS research and development initiatives are Company sponsored
initiatives that will primarily focus on:

     - Extending the capabilities of its primary software tools;

     - Enhancing existing and developing new predictive analytic applications;

     - Integrating and improving the interoperability of various SPSS tools and
       applications;

     - Continuing to build reusable components for use in developing new
       analytical tools;

     - Establishing directions concerning future platforms and deployment,
       including J2EE and .NET, data visualization, in-database modeling and
       scoring, and the adoption of emergent standards; and

     - Demonstrating industry leadership through active participation in
       standards organizations for predictive analytics, such as PMML and CRISP
       DM.

     The SPSS research and development staff currently includes professionals
organized into groups for product management, algorithm development, software
engineering, user interface design, documentation, quality assurance and product
localization. SPSS also uses independent contractors in its research and
development efforts. SPSS has outsourced maintenance, conversion and new
programming for some products to enable its internal development staff to focus
on products that are of greater strategic significance. Expenditures by SPSS for
research and development of new products, services and techniques, including
capitalized software, were approximately $57.0 million in 2004, $54.4 million in
2005, and $64.4 million in 2006.

     Most of the statistical algorithms used by SPSS in its software are
published for the convenience of its customers. SPSS employs full-time
statisticians who regularly research and evaluate new algorithms and statistical
techniques for inclusion in its software. SPSS also employs professionals
trained in the use of predictive analytics in its documentation, quality
assurance, software design and software engineering groups.

COMPETITION

     In selling its predictive analytic tools and applications, SPSS competes
primarily on the return on investment that its software produces. In addition,
the Company competes on the basis of the usability, functionality, performance,
reliability and connectivity of its software. The significance of each of these
factors varies depending upon the anticipated use of the software and the
analytical training and expertise of the customer. To a lesser extent, SPSS
competes on the basis of price and thus maintains pricing policies to meet
market demand. The Company also offers flexible licensing arrangements to
satisfy customer requirements.

     Historically, the Company's success has been driven by highly usable
interfaces, comprehensive analytical capabilities, efficient performance
characteristics, local language versions, consistent quality, connectivity
capabilities, worldwide distribution, and widely recognized brand names. SPSS
considers its primary worldwide competitor in each of its targeted markets to be
the larger SAS, although SPSS believes that the SAS's revenues are derived
primarily from offerings in areas other than predictive analytics.

     Within the predictive tools market, the Company competes with SAS,
StatSoft, Inc., Minitab, Inc., Insightful Corporation and StataCorp with regard
to products in the Company's Statistics Family. With the exception of SAS, the
annual revenues of these companies from statistical products are believed to be
considerably less than the revenues of SPSS. Also within the predictive tools
market, the Company competes with offerings from SAS, NCR Corporation, Fair
Isaac Corporation, KXEN, Inc. and Angoss Software Corporation with regard to
products in the Company's Data Mining Family.  With the exception of SAS, none
of the Company's competitors with regard to either statistical tools or data
mining products are believed to currently offer the range of predictive analytic
capability provided by SPSS.


                                        7

<PAGE>

     Within the predictive deployment solutions market, SPSS faces competition
from well-financed companies such as Oracle Corporation, Fair Isaac Corporation,
Choicepoint Inc., Unica Corporation, NCR Corporation and Infor.

     Within the enterprise feedback management (EFM) market, SPSS faces
competition from companies such as Pulse Train Ltd., Future Information Research
Management (FIRM), Perseus Development Corporation and Global Market Insite,
Inc. SPSS holds a strong position in this market and believes that no
competitors in this market are larger and better financed. The annual revenues
of competitors in the enterprise feedback management (EFM) market are thought to
be considerably less than the Company's revenues in this market.

     In the future, SPSS may face competition from other new entrants into its
markets. SPSS could also experience competition from companies in the business
intelligence software sector, such as providers of OLAP and analytical
application software, companies in the data provider sector, such as companies
in the credit scoring or personal demographic information business, as well as
from companies in other sectors of the broader market for enterprise
applications, which could add predictive analytical functionality to their
existing products. Some of these potential competitors have significant capital
resources, marketing experience and research and development capabilities. New
competitive offerings by these companies or other companies could have a
material adverse effect on SPSS.

INTELLECTUAL PROPERTY

     SPSS attempts to protect its proprietary software with trade secret laws
and internal nondisclosure safeguards, as well as copyrights, patents and
contractual restrictions on copying, disclosure and transferability that are
incorporated into its software license agreements. SPSS licenses its software
only in the form of executable code, with contractual restrictions on copying,
disclosures and transferability. For multi-user licenses of its software, SPSS
requires its customers to sign a license agreement. For single-user licenses of
its software, SPSS licenses its software via a "shrink-wrap" license, as is
customary in the industry. The source code for all SPSS products is protected as
a trade secret. In addition, SPSS has common law copyright protection for its
source code and has filed for copyright and patent protection under federal law
with respect to certain source code. SPSS has also entered into confidentiality
and nondisclosure agreements with its key employees. Despite these restrictions,
the possibility exists for competitors or users to copy aspects of SPSS products
or to obtain information which SPSS regards as a trade secret. Although SPSS
holds six patents and has one patent in registration, judicial enforcement of
patent laws, copyright laws and trade secrets may be uncertain, particularly
outside of the United States. Preventing unauthorized use of computer software
is difficult, and software piracy is expected to be a persistent problem for the
packaged software industry. These problems may be particularly acute in
international markets.

     SPSS uses a variety of trademarks with its products. Management believes
the following are material to its business:

     - SPSS is a trademark used in connection with virtually all of the
       technology, solutions, and products of the Company;

     - Clementine is a registered trademark and is used in connection with the
       product line that SPSS acquired from Integral Solutions Limited;

     - PredictiveMarketing, PredictiveCallCenter, and PredictiveClaims are
       trademarks, pending registration, used in connection with the SPSS
       analytical applications for customer relationship management (CRM);

     - Dimensions is an unregistered trademark used in connection with the
       Company's market research products on all platforms;

     - Quantime is an unregistered trademark used in connection with the
       Company's market research products on all platforms; and

     - ShowCase is an unregistered trademark used with products licensed by SPSS
       in its Business Intelligence family of products.


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     Some of these trademarks comprise portions of other SPSS trademarks. SPSS
has registered some of its trademarks in the United States and some of its
trademarks in a number of other countries, including the Netherlands, France,
Germany, the United Kingdom, Japan, Singapore and Spain.

     Due to the rapid pace of technological change in the software industry,
SPSS believes that patent, trade secret, and copyright protection are less
significant to its competitive position than factors such as the knowledge,
ability, and experience of the Company's personnel, new research and
development, frequent technology and product enhancements, name recognition and
ongoing reliable technology maintenance and support.

     SPSS believes that its software tools, predictive analytic applications,
trademarks and other proprietary rights do not infringe the proprietary rights
of third parties. There can be no assurance, however, that third parties will
not assert infringement claims in the future or that the claim will not have a
material adverse affect on SPSS if it is decided adversely to SPSS.

RELIANCE ON THIRD PARTIES

     SPSS licenses various software programs from third-party developers and
incorporates them into SPSS products. Many of these are exclusive worldwide
licenses that terminate on various dates. SPSS believes that it will be able to
renew non-perpetual licenses or obtain substitute products if needed.

  DATA DIRECT

     Data Direct licenses to SPSS software products that enable data to transfer
between SPSS products and third party databases. SPSS has an agreement with Data
Direct that expires in May 2009. This agreement enables SPSS to embed and
distribute, as an integral part of its offerings, an unlimited number of copies
of the Data Direct products for a fixed annual license and maintenance fee.

  BANTA GLOBAL TURNKEY SOFTWARE DISTRIBUTION AGREEMENT

     Banta Global Turnkey manufactures, packages and distributes a majority of
the Company's software products in the United States and multiple international
locations. Banta has provided these services to SPSS since 1997, and SPSS and
Banta amended and renewed their distribution agreement in January 2006. The
agreement with Banta has a three-year term and automatically renews thereafter
for successive one-year periods. Either party may terminate the agreement for
cause if the other party materially breaches its obligations.

  HYPERION SOLUTIONS

     In January 2007, SPSS renewed its strategic relationship with Hyperion
Solutions. This renewal extended the term of the Company's contract with
Hyperion until 2012. Under the revised agreement, SPSS has the non-exclusive
right to license, market and distribute the releases of Hyperion's Essbase and
Analyzer software. Such right will not extend to Release 9 and beyond of
Hyperion's software. SPSS will, however, continue to port future releases of the
software to the i-Series computer platform and provide customer support for that
software in exchange for a portion of the support fees charged to end-users.

EMPLOYEES

     As of December 31, 2006, SPSS had 1,193 full-time employees, 660
domestically and 533 internationally. Of the 1,193 employees, there were 534 in
sales, marketing and professional services, 442 in research and development, and
217 in general and administrative. SPSS believes it has generally good
relationships with its employees. None of the Company's employees are members of
labor unions. The Company also had 69 part-time employees as of December 31,
2006.


                                        9

<PAGE>

FINANCIAL INFORMATION ABOUT THE COMPANY'S FOREIGN AND DOMESTIC OPERATIONS AND
EXPORT SALES

     The following table sets forth financial information about foreign and
domestic operations. This information may not necessarily be indicative of
trends for future periods.


<Table>
<Caption>
                                                     YEAR ENDED DECEMBER 31,
                                                 ------------------------------
                                                   2004       2005       2006
                                                 --------   --------   --------
                                                         (IN THOUSANDS)

<S>                                              <C>        <C>        <C>

Sales to unaffiliated customers:
  United States................................  $101,665   $102,775   $109,752
  Europe.......................................    90,941     98,643    111,537
  Pacific Rim..................................    31,468     34,645     40,243
                                                 --------   --------   --------
     Total.....................................  $224,074   $236,063   $261,532
                                                 ========   ========   ========
Sales or transfers between geographic areas:
  United States................................  $ 27,019   $ 28,598   $ 34,467
  Europe.......................................   (13,820)   (15,017)   (18,372)
  Pacific Rim..................................   (13,199)   (13,581)   (16,095)
                                                 --------   --------   --------
     Total.....................................  $     --   $     --   $     --
                                                 ========   ========   ========
Operating income (loss):
  United States................................  $ (9,953)  $  2,945   $  2,959
  Europe.......................................    12,632     19,587     22,625
  Pacific Rim..................................     3,897      5,492      8,719
                                                 --------   --------   --------
     Total.....................................  $  6,576   $ 28,024   $ 34,303
                                                 ========   ========   ========
Identifiable assets:
  United States................................  $153,128   $167,744   $187,761
  Europe.......................................    59,364     62,764     90,890
  Pacific Rim..................................    22,833     41,389     53,843
                                                 --------   --------   --------
     Total.....................................  $235,325   $271,897   $332,494
                                                 ========   ========   ========

</Table>


     SPSS revenues from operations outside of the United States accounted for
approximately 55% in 2004, 56% in 2005 and 58% in 2006. Net revenues per
geographic region are attributed to countries based upon point of sale. SPSS
expects that revenues from international operations will continue to represent a
large percentage of its net revenues and that this percentage may increase,
particularly as the Company further localizes its offerings by translating them
into additional languages. Various risks impact international operations. See
Item 1, "Business -- Sales and Marketing," Item 1A, "Risk Factors," Item 7,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," and Note 2, "Domestic and Foreign Operations," of the Notes to
Consolidated Financial Statements.

ITEM 1A.  RISK FACTORS

     In addition to factors discussed elsewhere in this Annual Report on Form
10-K, the following are important risks which could adversely affect the
Company's future results. If any of the following risks actually occurred, the
Company's business and financial condition or the results of its operations
could be materially adversely affected, the trading price of the Company's
common stock could decline, and investors could lose all or part of their
investment in SPSS. In addition to the risks and uncertainties described below,
additional risks and uncertainties not presently known to SPSS, or those SPSS
currently believes are immaterial, could also impair the Company's business
operations.


                                       10

<PAGE>

THE COMPANY'S FINANCIAL RESULTS AND STOCK PRICE MAY BE ADVERSELY AFFECTED BY
QUARTERLY FLUCTUATIONS WHICH ARE BEYOND ITS CONTROL.

     The Company's quarterly revenue and operating results have varied in the
past and may continue to do so in the future due to several factors, including:

     - The influence of third party vendors and development delays on the number
       and timing of product updates and new product introductions;

     - Delays in product development and introduction of new technologies;

     - Purchasing schedules of its customers;

     - Changes in foreign currency exchange rates;

     - Changes in prescribed accounting rules and practices;

     - The timing of product shipments as a result of the delivery schedules of
       fulfillment vendors and the timing of solution implementations;

     - Changes in product mix and solutions revenues;

     - Timing, cost and effects of acquisitions; and

     - General economic conditions.

     Because expense levels are to a large extent based on forecasts of future
revenues, the Company's operating results may be adversely affected if its
future revenues fall below expectations. Accordingly, SPSS believes that
quarter-to-quarter comparisons of its results of operations may not be
meaningful and should not be relied upon as an indication of future performance.

     In addition, the timing and amount of the Company's revenues may be
affected by a number of factors that make estimation of operating results before
the end of a quarter uncertain. A significant portion of the Company's operating
expenses are relatively fixed, and planned expenditures are based primarily on
revenue forecasts. The variable profit margins on modest increases in sales
volume at the end of fiscal quarters are significant and, should SPSS fail to
achieve these revenue increases, net income could be materially affected.
Generally, if revenues do not meet the Company's expectations in any given
quarter, its operating results will be adversely affected. There can be no
assurance that profitability on a quarterly or annual basis can be achieved or
sustained in the future.

THE ANTICIPATED BENEFITS OF THE COMPANY'S ACQUISITIONS MAY NOT MATERIALIZE,
THEREBY EXPOSING THE COMPANY TO MORE EXPENSIVE AND LESS EFFICIENT OPERATIONS.

     SPSS has made a number of acquisitions, including the acquisition of
businesses based outside of the United States. Part of the Company's growth
strategy includes pursuing additional acquisitions. Any of these transactions
could be material to its financial condition and results of operations. In
addition, the process of integrating an acquired company, business or technology
involves risk and may create unforeseen operating difficulties and expenditures.
These areas of risk include:

     - the need to implement or remediate controls, procedures and policies at
       companies that, prior to the acquisition, lacked these controls,
       procedures and policies;

     - interruption of, or a distraction of management's attention from, the
       Company's business;

     - cultural challenges associated with integrating employees from the
       acquired company into the Company's organization; and

     - the need to integrate each company's accounting, management information,
       human resource and other administrative systems to permit effective
       management.

     Foreign acquisitions involve unique risks in addition to those mentioned
above, including those related to the integration of operations across different
cultures and languages, currency risks and the particular economic, political
and regulatory risks associated with specific countries.


                                       11

<PAGE>

     SPSS may not be able to consummate these potential future acquisitions on
terms acceptable to it, or at all. Further, the anticipated benefit of many of
the Company's acquisitions may not materialize. Future acquisitions or
dispositions could result in potentially dilutive issuances of the Company's
equity securities, the incurrence of debt, contingent liabilities or
amortization expenses, or write-offs of goodwill, any of which could harm the
Company's financial condition. Any of these events could have a material adverse
effect on SPSS.

IF SPSS DOES NOT RESPOND ADEQUATELY TO RAPID TECHNOLOGICAL CHANGES, ITS EARNINGS
MAY BE ADVERSELY AFFECTED.

     The computer software industry is characterized by rapid technological
advances, changes in customer requirements, as well as frequent enhancements to
and introductions of technologies. The Company's future success will depend upon
its ability to enhance its existing software and introduce new software products
that keep pace with technological developments, respond to evolving customer
requirements and achieve market acceptance. In particular, SPSS believes it must
continue to respond quickly to users' needs for greater functionality, improved
usability and support for new hardware and operating systems. Any failure by
SPSS to respond adequately to technological developments and customer
requirements, or any significant delays in software development or introduction,
could result in loss of revenues.

     In the past, SPSS has, on occasion, experienced delays in the introduction
of new software and enhancements to existing technology, primarily due to
difficulties with particular operating environments and problems with software
provided by third parties. The extent of these delays has varied depending upon
the size and scope of the project and the nature of the problems encountered.
These delays have most often resulted from "bugs" encountered in working with
new versions of operating systems and other third party software, and "bugs" or
unexpected difficulties in existing third party software which complicate
integration with the Company's software. From time to time, SPSS has discovered
"bugs" in its software that are resolved through maintenance releases or through
periodic updates depending upon the seriousness of the defect. There can be no
assurance that SPSS will be successful in developing and marketing new software
or enhancements to existing technology on a timely basis or that SPSS will not
experience significant delays or defects in its software in the future, which
could have a material adverse effect on the Company. In addition, there can be
no assurance that new software or enhancements to existing technology developed
by SPSS will achieve market acceptance or that developments by others will not
render its technologies obsolete or noncompetitive.

REVENUES FROM INTERNATIONAL OPERATIONS REPRESENT A LARGE PERCENTAGE OF THE
COMPANY'S NET REVENUES. CERTAIN RISKS ASSOCIATED WITH OPERATING THE COMPANY'S
BUSINESS OUTSIDE OF THE UNITED STATES MAY HAVE A MATERIAL ADVERSE AFFECT ON ITS
BUSINESS.

     Revenues from operations outside of the United States accounted for
approximately 55% of the Company's total revenues in 2004, 56% in 2005 and 58%
in 2006. SPSS expects that revenues from international operations will continue
to represent a large percentage of its net revenues and that this percentage may
increase, particularly as SPSS further "localizes" products by translating them
into additional languages and expands its operations through acquisitions of
companies outside the United States. A number of risk factors may affect the
Company's international revenues, including:

     - greater difficulties in accounts receivable collection;

     - longer payment cycles;

     - exposure to currency fluctuations;

     - political and economic instability; and

     - the burdens of complying with a wide variety of foreign laws and
       regulatory requirements.

     SPSS also believes that it is exposed to greater levels of software piracy
in certain international markets where weaker protection is afforded to
intellectual property. As SPSS expands its international operations, the risks
described above could increase and, in any event, could have a material adverse
effect on SPSS.


                                       12

<PAGE>

THE COMPANY'S STOCK PRICE MAY EXPERIENCE VOLATILITY, THEREBY CAUSING A POTENTIAL
LOSS OF VALUE TO ITS INVESTORS.

     There has been significant volatility in the market prices of securities of
technology companies, including SPSS, and, in some instances, this volatility
has been unrelated to the operating performance of those companies. Market
fluctuations may adversely affect the price of the Company's common stock. SPSS
also believes that, in addition to factors such as interest rates and economic
conditions which affect stock prices generally, some, but not all, of the
factors which could result in fluctuations in its stock price include:

     - announcements of new products by SPSS or its competitors;

     - quarterly variations in financial results;

     - recommendations and reports of analysts;

     - acquisitions; and

     - other factors beyond the Company's control.

SPSS RELIES ON THIRD PARTIES FOR CERTAIN SOFTWARE. THE LOSS OF THESE
RELATIONSHIPS COULD HAVE A MATERIAL ADVERSE EFFECT ON THE COMPANY'S PRODUCTS.

     SPSS licenses software from third parties. Some of this licensed software
is embedded in its products, and some is offered as add-on products. If these
licenses are discontinued, or become invalid or unenforceable, there can be no
assurance that SPSS will be able to develop substitutes for this software
independently or to obtain alternative sources in a timely manner. Any delays in
obtaining or developing substitutes for licensed software could have a material
adverse effect on SPSS.

SPSS RELIES ON THIRD PARTIES FOR SOFTWARE DISTRIBUTION. THE LOSS OF THESE
RELATIONSHIPS COULD HAVE A MATERIAL ADVERSE EFFECT ON THE COMPANY'S OPERATING
RESULTS.

     Since January 1997, SPSS has had a software distribution agreement with
Banta Global Turnkey. The original agreement was amended and restated in January
2006. Pursuant to the software distribution agreement, Banta manufactures,
packages and distributes a majority of the Company's software products to its
domestic and international customers and various international subsidiaries.
Either party may terminate the agreement for cause if the other party materially
breaches its obligations. If Banta fails to perform adequately any of its
obligations under the Banta agreement, the Company's operating results could be
materially adversely affected.

CHANGES IN PUBLIC EXPENDITURES MAY ADVERSELY AFFECT THE COMPANY'S RESULTS OF
OPERATIONS.

     A significant portion of the Company's revenues comes from licenses of its
software directly to government entities both internationally and in the United
States. In addition, significant amounts of the Company's revenues come from
licenses to academic institutions, healthcare organizations and private
businesses that contract with or are funded by government entities. Government
appropriations processes are often slow and unpredictable and may be affected by
factors outside the Company's control. In addition, proposals are currently
being made in various countries to reduce government spending. Reductions in
government expenditures and termination or renegotiation of government-funded
programs or contracts could have a material adverse effect on SPSS. In addition,
declines in overall levels of economic activity could also have a material
adverse impact on SPSS.

SPSS MAY BE UNABLE TO CONTINUE TO COMPETE WITH COMPANIES IN ITS INDUSTRY THAT
HAVE FINANCIAL OR OTHER ADVANTAGES. FAILURE TO COMPETE SUCCESSFULLY COULD HAVE A
MATERIAL ADVERSE EFFECT ON THE COMPANY'S BUSINESS.

     The Company's historical market for statistical software is both highly
competitive and fragmented. SPSS is among the largest companies in the
statistical software market. However, SPSS faces competition from providers of
statistical software, data mining tools, predictive analytic applications and
analytic applications to the market research industry. SPSS believes that it
competes effectively against its competitors, but there can be no assurance that
it will continue to do so in the future.


                                       13

<PAGE>

     In the future, SPSS may also face competition from new entrants into its
current or future markets. Some of these potential competitors may have
significant capital resources, marketing experience and research and development
capabilities. Competitive pressures from the introduction of new solutions and
products by these companies or other companies could have a material adverse
effect on SPSS.

SPSS DEPENDS ON KEY EXECUTIVES. A LOSS OF THESE EXECUTIVES AND OTHER PERSONNEL
COULD NEGATIVELY IMPACT THE COMPANY'S OPERATIONS.

     SPSS is dependent on the efforts of various key executives and employees.
The Company's continued success will depend in part on its ability to attract
and retain highly qualified technical, managerial, sales, marketing and other
personnel. Competition for highly qualified personnel is intense. The Company's
inability to continue to attract or retain highly qualified personnel could have
a material adverse effect on its financial position and results of operation. No
life insurance policies are maintained on the Company's key personnel.

SPSS MAY NOT RECEIVE THE FULL BENEFITS OF ITS INTELLECTUAL PROPERTY PROTECTIONS.

     The analytical algorithms incorporated in the Company's software are not
proprietary. SPSS believes that the portion of its technology that is
proprietary is the portion that determines the speed and quality of displaying
the results of computations, the ability of its software to work in conjunction
with third party software, and the ease of use of its software. The Company's
success will depend, in part, on its ability to protect these proprietary
aspects of its software. SPSS attempts to protect its proprietary software with
trade secret laws and internal nondisclosure safeguards, as well as copyright,
trademark and patent laws and contractual restrictions on copying, disclosure
and transferability that are incorporated into its software license agreements.
However, there is no guarantee that these protections will prove effective.

     Preventing unauthorized use of computer software is difficult, and software
piracy is a persistent problem for the packaged software industry. These
problems may be particularly acute in international markets. In addition, the
laws of various countries in which the Company's software is or may be licensed
do not protect its software and intellectual property rights to the same extent
as the laws of the United States. Despite the precautions that SPSS takes, it
may be possible for unauthorized third parties to reverse engineer or copy the
Company's products or obtain and use information that SPSS regards as
proprietary. There can be no assurance that the steps that SPSS takes to protect
its proprietary rights will be adequate to prevent misappropriation of its
technology.

     Although the Company's software has never been the subject of an
infringement claim, there can be no assurance that third parties will not assert
infringement claims against SPSS in the future or that any infringement
assertion will not result in costly litigation or require SPSS to obtain a
license to use the intellectual property of third parties. There can be no
assurance that these licenses will be available on reasonable terms, or at all.
There can also be no assurance that the Company's competitors will not
independently develop technologies that are substantially equivalent or superior
to the Company's technologies.

ANTI-TAKEOVER PROTECTIONS MAY MAKE IT DIFFICULT FOR A THIRD PARTY TO ACQUIRE
SPSS.

     SPSS maintains a stockholder Rights Agreement which was adopted by the
Board in 1998 and amended in June 2004. The Rights Agreement and common stock
purchase rights issued in connection with the Rights Agreement are intended to
ensure that its stockholders receive fair and equal treatment in the event of a
proposed takeover of SPSS. The Rights Agreement may discourage a potential
acquirer from acquiring control of SPSS.

     The Company's Certificate of Incorporation and By-Laws contain a number of
provisions, including provisions requiring an 80% super-majority stockholder
approval of specified actions and provisions for a classified Board of
Directors, which would make the acquisition of SPSS, by means of an unsolicited
tender offer, a proxy contest or otherwise, more difficult. The Company's bylaws
provide for a staggered board of directors so that only one-third of the total
number of directors are replaced or re-elected each year. Therefore, potential
acquirers of SPSS may face delays in replacing the existing directors.


                                       14

<PAGE>

     Certain of the Company's senior executives and other officers may be
entitled to substantial payments in the event of their termination without cause
or constructive termination following a change of control of SPSS. These
payments could have the effect of discouraging a potential acquirer from
acquiring control of SPSS.

SPSS MAY NOT MAINTAIN EFFECTIVE INTERNAL CONTROL OVER FINANCIAL REPORTING WHICH
COULD HAVE A MATERIAL ADVERSE EFFECT ON SPSS.

     In the event SPSS does not maintain effective internal control over
financial reporting, the Company's financial statements could be inaccurate. If
SPSS has inaccurate financial statements, it could have a material adverse
effect on the value of the Company's common stock.

ITEM 1B.  UNRESOLVED STAFF COMMENTS

     N/A

ITEM 2.  PROPERTIES

     The Company's principal administrative, marketing, training, product
development and support facilities are located at the Sears Tower, 233 South
Wacker Drive, Chicago, Illinois 60606. SPSS maintains a 15 year sublease
agreement to sublease 99,444 square feet of office space in the Sears Tower,
which sublease agreement will expire in 2012. SPSS also maintains a lease
agreement for an additional 41,577 square feet of office space in the Sears
Tower, which lease agreement will also expire in 2012. The aggregate annual
gross rental payments on these leases for office space in the Sears Tower were
approximately $3.3 million for the year 2006. SPSS believes that these office
spaces are adequate to fulfill the Company's needs for the foreseeable future.

     In addition, SPSS leases office space in New York, Virginia, Ohio, Florida,
Wisconsin, Minnesota and California. During 2006, SPSS also leased office space
in Massachusetts, Pennsylvania and Texas. SPSS leases office space
internationally in Holland, the United Kingdom, Denmark, Belgium, Spain,
Germany, Sweden, France, Australia, Singapore, Malaysia, Japan, and China. The
aggregate annual gross rental payments on these leases were approximately $9.0
million for the year 2006.

     SPSS believes its facilities are suitable and adequate for its present
needs, and plans to expand its facilities only on an as-needed basis. The
Company does not expect any such expansion to materially affect its real estate
lease costs.

ITEM 3.  LEGAL PROCEEDINGS

     On January 22, 2007, a putative derivative action captioned Fortney v.
Noonan, et. al., was filed in the United States District Court for the Northern
District of Illinois, Eastern Division. The action purports to assert claims on
behalf of the Company against several current and former executive officers and
members of the Board of Directors alleging improper backdating of stock option
grants to maximize certain defendants' profits, failing to properly account for
and take tax deductions for those grants, insider trading and issuing false
financial statements. The current executive officers and directors who are named
in the complaint are Jack Noonan, William Binch, Michael Blair, Kenneth Holec,
Merritt Lutz and Norman Nie. The Company is named as a nominal defendant. The
complaint alleges various causes of action under federal and Delaware law,
including claims for unjust enrichment, breach of fiduciary duty and rescission,
as well as claims under Sections 14(a) and 20(a) of the Securities Exchange Act
of 1934. Plaintiffs seek damages, disgorgement and restitution. As previously
disclosed by the Company in July 2006, the Company has completed a detailed
review of its accounting for stock option grants. As a result of the review, the
Company reclassified approximately $3.3 million of retained earnings to
additional paid-in capital and has determined that no further accounting
adjustments are required. The Company's response to the complaint is not yet
due.

     SPSS Inc. has been named as a defendant in a lawsuit filed on December 6,
2002 in the United States District Court for the Southern District of New York,
under the caption Basu v. SPSS Inc., et al., Case No. 02CV9694. The complaint
alleges that, in connection with the issuance and initial public offering of
shares of common stock of NetGenesis Corp., the registration statement and
prospectus filed with the Securities and Exchange Commission in

                                       15

<PAGE>

connection with the IPO contained material misrepresentations and/or omissions.
The alleged violations of the federal securities laws took place prior to
December 31, 2001, the effective date of the merger in which the Company's
acquisition subsidiary merged with and into NetGenesis Corp. NetGenesis Corp. is
now a wholly owned subsidiary of SPSS. Other defendants to this action include
the former officers and directors of NetGenesis Corp. and the investment banking
firms that acted as underwriters in connection with the IPO. The plaintiff is
seeking unspecified compensatory damages, prejudgment and post-judgment
interest, reasonable attorney fees, experts' witness fees and other costs and
any other relief deemed proper by the Court. The Company is aggressively
defending itself, and plans to continue to aggressively defend itself against
the claims set forth in the complaint. The Company and the named officers and
directors filed an answer to the complaint on July 14, 2003. At this time, the
Company believes the lawsuit will be settled with no material adverse effect on
its results of operations, financial condition, or cash flows.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     N/A


                                       16

<PAGE>

                                     PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
         ISSUER PURCHASES OF EQUITY SECURITIES

     The Company's common stock is traded on the Global Select tier of the
Nasdaq Stock Market under the symbol "SPSS."

     The following table shows, for the periods indicated, the high and low sale
price of the Company's common stock:


<Table>
<Caption>
                                                             HIGH      LOW
                                                            ------   ------

<S>                                                         <C>      <C>

YEAR END DECEMBER 31, 2005
First Quarter.............................................  $19.95   $13.64
Second Quarter............................................   19.94    15.57
Third Quarter.............................................   24.35    17.68
Fourth Quarter............................................   31.84    21.54
YEAR END DECEMBER 31, 2006
First Quarter.............................................   34.10    28.75
Second Quarter............................................   39.51    30.74
Third Quarter.............................................   33.74    21.73
Fourth Quarter............................................   31.83    23.92
</Table>


     As of February 15, 2007, there were 693 holders of record of the Company's
common stock.

     SPSS has never declared a cash dividend or paid any cash dividends on its
capital stock. SPSS does not anticipate paying any cash dividends on SPSS common
stock in the foreseeable future because SPSS expects to retain future earnings
for use in the operation and expansion of its business. See Item 7,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."

PERFORMANCE GRAPH

     The following graph shows the changes in $100 invested since December 31,
2001, in the Company's common stock, the NASDAQ 100 Stocks Index and the Goldman
Sachs Software Index, assuming that all dividends were reinvested.

                               (PERFORMANCE GRAPH)



<Table>
<Caption>
--------------------------------------------------------------------------------------------------------------------
                                         12/31/2001   12/31/2002   12/31/2003   12/31/2004   12/31/2005   12/31/2006
--------------------------------------------------------------------------------------------------------------------
<S>                                     <C>          <C>          <C>          <C>          <C>          <C>
SPSS (NASDAQ: SPSS)                       $100.00       $78.82      $100.73      $ 88.11      $174.25      $169.41
--------------------------------------------------------------------------------------------------------------------
NASDAQ 100 Stock Index                    $100.00       $62.63      $ 93.70      $102.58      $103.86      $110.92
--------------------------------------------------------------------------------------------------------------------
Goldman Sachs Software Index              $100.00       $56.07      $ 84.15      $ 95.56      $ 90.99      $100.86
--------------------------------------------------------------------------------------------------------------------
</Table>




                                       17

<PAGE>

ITEM 6.  SELECTED FINANCIAL DATA

     The selected consolidated financial data presented below for each of the
years in the five-year period ended December 31, 2006 are derived from and
should be read in conjunction with the Consolidated Financial Statements of SPSS
and the footnotes thereto which have been audited. The Consolidated Financial
Statements as of December 31, 2005 and 2006, and for each of the years in the
three-year period ended December 31, 2006, are included elsewhere in this Form
10-K.


<Table>
<Caption>
                                                          YEAR ENDED DECEMBER 31,
                                           ----------------------------------------------------
                                             2002       2003       2004       2005       2006
                                           --------   --------   --------   --------   --------
                                                   (IN THOUSANDS, EXCEPT PER SHARE DATA)

<S>                                        <C>        <C>        <C>        <C>        <C>

Net revenues:
  License(1).............................  $ 93,063   $ 91,473   $ 95,819   $107,568   $125,017
  Maintenance(2).........................    81,481     83,557     97,735    102,241    109,277
  Services(3)............................    33,936     33,337     30,520     26,254     27,238
                                           --------   --------   --------   --------   --------
     Net revenues........................   208,480    208,367    224,074    236,063    261,532
Operating expenses:
  Cost of license and maintenance
     revenues............................    17,696     14,359     14,642     16,381     17,479
  Cost of license and maintenance
     revenues -- software write-offs.....     5,928      1,961         --         --      1,283
  Sales, marketing and services..........   130,303    123,454    129,987    117,872    124,127
  Research and development...............    41,624     44,167     47,765     45,418     51,595
  General and administrative(4)..........    18,032     18,194     25,104     28,368     32,745
  Special general and administrative
     charges(5)..........................     9,037      6,104         --         --         --
  Merger-related(6)......................     2,260         --         --         --         --
  Illumitek shut-down charges(7).........       518         --         --         --         --
  Acquired in-process technology(8)......       150         --         --         --         --
                                           --------   --------   --------   --------   --------
     Operating expenses..................   225,548    208,239    217,498    208,039    227,229
                                           --------   --------   --------   --------   --------
Operating income (loss)..................   (17,068)       128      6,576     28,024     34,303
                                           --------   --------   --------   --------   --------
Net interest and investment income
  (expense)..............................       (63)       (42)      (282)       161      3,139
Gain on divestiture of Sigma-series
  product line(9)........................        --      8,577         82      1,000      1,000
Other income (expense)...................       752      1,798      1,680     (2,013)    (3,981)
                                           --------   --------   --------   --------   --------
Income (loss) before income taxes and
  minority interest......................   (16,379)    10,461      8,056     27,172     34,461
Provision for income taxes...............       878      1,147      2,513     11,080     19,321
                                           --------   --------   --------   --------   --------
Income (loss) before minority interest...   (17,257)     9,314      5,543     16,092     15,140
Minority interest........................       497         --         --         --         --
                                           --------   --------   --------   --------   --------
Net income (loss)........................  $(16,760)  $  9,314   $  5,543   $ 16,092   $ 15,140
                                           ========   ========   ========   ========   ========
Basic net income (loss) per share........  $  (0.99)  $   0.54   $   0.31   $   0.88   $   0.78
Diluted net income (loss) per share......  $  (0.99)  $   0.53   $   0.31   $   0.85   $   0.73
Shares used in basic EPS calculation.....    16,887     17,351     17,671     18,228     19,451
Shares used in diluted EPS calculation...    16,887     17,562     17,884     18,880     20,645
Balance Sheet Data:
  Working capital........................  $ (9,176)  $ 16,629   $ 13,846   $ 37,415   $ 92,099
  Total assets...........................   213,619    229,007    235,325    271,897    332,494
  Current deferred revenue...............    52,765     59,051     62,148     63,980     73,483
  Long term obligations, less current
     portion.............................     6,781      7,764      4,994      1,867      1,540
  Total stockholders' equity.............   101,993    119,639    128,459    163,746    216,523
</Table>


--------

   (1) License revenues include sales of the Company's tools, applications and
       components on a perpetual, annual or ASP (applications service provider)
       basis.


                                       18

<PAGE>

   (2) Maintenance revenues include recurring revenues recognized by the Company
       from renewals of maintenance agreements associated with perpetual
       licenses or renewals of annual licenses.

   (3) Services include revenues recognized from professional services
       engagements, training and other activities such as publication sales and
       providing respondents to online surveys.

   (4) Includes provision for doubtful accounts.

   (5) Includes noncapitalizable costs associated with acquisitions, as well as
       costs associated with severance and the write-down of obsolete internal
       use software.

   (6) Includes noncapitalizable costs directly related to acquisitions, such as
       investment banking and other professional fees, employee severance,
       merger-related bonuses and costs associated with closing excess office
       space and the write-off of redundant assets.

   (7) In 2001, the Company purchased 50% of the then-issued and outstanding
       shares of stock of Illumitek Inc. In 2002, SPSS terminated its investment
       in Illumitek. These costs reflect costs associated with this termination
       and the related write-down of Illumitek technology.

   (8) Includes costs related to acquired in-process technology in conjunction
       with business combinations accounted for as purchases.

   (9) During 2003, the Company entered into an agreement to license the
       distribution of its Sigma-series line of products and sell certain
       related assets. During 2004, SPSS recorded a favorable adjustment to
       reduce certain professional fee accruals associated with this
       transaction. During 2005, SPSS recorded additional gain related to
       receipt of final license payment of $1.0 million related to this
       transaction. This transaction was accounted for as a divestiture of a
       business. Systat made a final payment of $1.0 million to SPSS in 2006 to
       exercise its option to purchase the licensed property. See additional
       discussion in Note 7 of the Notes to Consolidated Financial Statements.

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

OVERVIEW AND BACKGROUND

     SPSS is a global provider of predictive analytics technology and services.
The Company's offerings connect data to effective action by enabling decision
makers to draw reliable conclusions about current conditions and future events.
Predictive analytics leverages an organization's business knowledge by applying
sophisticated analytic techniques to enterprise data. The insights gained
through the use of these techniques can lead to improved business processes that
increase revenues, reduce costs, and prevent fraudulent activities.

     The Company sells its products and services to a broad scope of industries.
Approximately 60% of the Company's 2006 revenues came from sales to customers in
corporate settings, with another 21% in academic institutions, 12% in government
agencies and 7% from nonprofit and healthcare organizations.

     The discussion set forth in this Item 7 is comprehensive in scope. The
following is background information intended to provide context and
clarification of certain key matters addressed in this discussion.

     Deferred Revenue.  Because of the nature of the Company's business,
management frequently discusses the timing of deferred revenue and the impact of
this timing on the Company's financial results. The Company generates a
significant portion of its revenue by selling software licenses. Software
licenses may be term licenses or perpetual licenses. If SPSS sells a term
license, the revenue associated with this license is deferred over the term of
the license. If SPSS sells a perpetual license, the license revenue is generally
recognized immediately but the revenue associated with maintenance of this
license is deferred over the contracted maintenance period which is typically a
12-month period. Both the mix of licenses (i.e. number of annual licenses and
the number of perpetual licenses) and the timing of when such licenses are
executed in a given quarter or fiscal year significantly affect the portion of
revenue that must be deferred for such period. References to deferred revenue
matters are made throughout this discussion.

     Transactions.  References are also made throughout this discussion to
transactions completed with the following companies over the past three fiscal
years: (a) Data Distilleries B.V. ("Data Distilleries") and (b) Systat

                                       19

<PAGE>

Software, Inc., a subsidiary of Cranes Software International Ltd. ("Systat").
Relevant facts surrounding each of these transactions are as follows:

     - In 2003, through one of its international subsidiaries, SPSS acquired
       Data Distilleries, a Netherlands-based developer of analytic
       applications. The products acquired through this acquisition are at the
       core of the Company's predictive deployment solutions offerings.

     - In 2003, the Company granted Systat an exclusive, worldwide license to
       distribute the Company's Sigma-Series product line for a three-year
       period. Systat also purchased all rights and obligations with respect to
       customers and personnel and all fixed assets related to the Sigma-Series
       product line. Systat assumed all responsibilities for the marketing and
       sales of the Sigma-Series product line as well as its ongoing development
       and technical support. Systat has paid all $13.0 million owed to SPSS in
       connection with this transaction. In 2006, Systat made a final payment of
       $1.0 million to SPSS to exercise its option to purchase the licensed
       property.

REFERENCES TO "NOTES" WITHIN THIS ITEM 7 REFER TO THE NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS IN ITEM 8, "FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA."
The following discussion should be read in conjunction with the Company's
consolidated financial statements and the notes thereto.

RESULTS OF OPERATIONS

COMPARISON OF THE YEARS ENDED DECEMBER 31, 2004, 2005 AND 2006

  NET REVENUE

     Revenues by product category, related amount changes, related percent
changes and percent of total revenues for 2004, 2005 and 2006 were as follows:


<Table>
<Caption>
                                        PERIOD
                            ------------------------------
                                YEAR ENDED DECEMBER 31,           AMOUNT CHANGE           PERCENTAGE CHANGE
                            ------------------------------   -----------------------   -----------------------
                              2004       2005       2006     '04 VS '05   '05 VS '06   '04 VS '05   '05 VS '06
                            --------   --------   --------   ----------   ----------   ----------   ----------
                                    (IN THOUSANDS)

<S>                         <C>        <C>        <C>        <C>          <C>          <C>          <C>

License...................  $ 95,819   $107,568   $125,017     $11,749      $17,449         12%         16%
Maintenance...............    97,735    102,241    109,277       4,506        7,036          5%          7%
Services..................    30,520     26,254     27,238      (4,266)         984        (14)%         4%
                            --------   --------   --------     -------      -------
  Net Revenues............  $224,074   $236,063   $261,532     $11,989      $25,469          5%         11%
                            --------   --------   --------     -------      -------
As a Percent of Revenue
License...................        43%        46%        48%
Maintenance...............        44%        43%        42%
Services..................        13%        11%        10%
                            --------   --------   --------
  Net Revenues............       100%       100%       100%
                            --------   --------   --------

</Table>


  2005 Compared with 2006

     The increase in license revenues from 2005 to 2006 was primarily driven by
higher sales of SPSS desktop statistical analysis tools in all major geographic
regions and by higher market research product revenues in the United States. The
impact of foreign currency decreased license revenue by $0.3 million in 2006
compared with 2005.

     The increase in maintenance revenues from 2005 to 2006 was primarily due to
higher and consistent renewal rates for the Company's major offerings, including
increases in all geographic regions. The impact of foreign currency increased
maintenance revenue by $0.2 million in 2006 compared with 2005.

     The increase in services revenues from 2005 to 2006 was primarily due to an
increase in consulting projects as a result of higher license revenue during
2006. Currency exchange rates had an immaterial impact on services revenue in
2006.


                                       20

<PAGE>

  2004 Compared with 2005

     The increase in license fee revenues from 2004 to 2005 was primarily driven
by higher sales of SPSS desktop statistical analysis tools including increases
in the United States, Europe, Southeast Asia and Japan. This increase was
partially offset by changes in currency exchange rates which resulted in a
decrease in license revenue of $0.2 million in 2005 compared with 2004.

     The increase in maintenance revenues from 2004 to 2005 was primarily due to
higher renewal rates for the Company's major offerings. This increase was
partially offset by changes in deferred revenue. The timing of deferred revenue
negatively impacted maintenance revenue by $4.0 million, or 4%, in 2005 compared
with 2004. The increase was also partially offset by changes in currency
exchange rates which resulted in a decrease in maintenance revenue of $0.1
million in 2005 compared with 2004.

     The decrease in services revenues from 2004 to 2005 was primarily due to a
decline in AOL service revenue of $3.7 million. This decline primarily resulted
from management's strategic business decision to modify the focus of its survey
sample business.

     Net revenues per geographic region, related amount changes, related percent
changes and percent of total revenues for 2004, 2005 and 2006 were as follows:


<Table>
<Caption>
                                        PERIOD
                            ------------------------------
                                YEAR ENDED DECEMBER 31,           AMOUNT CHANGE           PERCENTAGE CHANGE
                            ------------------------------   -----------------------   -----------------------
                              2004       2005       2006     '04 VS '05   '05 VS '06   '04 VS '05   '05 VS '06
                            --------   --------   --------   ----------   ----------   ----------   ----------
                                    (IN THOUSANDS)

<S>                         <C>        <C>        <C>        <C>          <C>          <C>          <C>

United States.............  $101,665   $102,775   $109,752     $ 1,110      $ 6,977         1%           7%
                            --------   --------   --------     -------      -------
United Kingdom............    31,701     31,911     34,047         210        2,136         1%           7%
The Netherlands...........    21,943     27,411     32,092       5,468        4,681        25%          17%
Other.....................    37,297     39,321     45,398       2,024        6,077         5%          15%
                            --------   --------   --------     -------      -------
  Total Europe............    90,941     98,643    111,537       7,702       12,894         8%          13%
                            --------   --------   --------     -------      -------
Japan.....................    21,032     22,416     25,446       1,384        3,030         7%          14%
Other.....................    10,436     12,229     14,797       1,793        2,568        17%          21%
                            --------   --------   --------     -------      -------
  Total Pacific Rim.......    31,468     34,645     40,243       3,177        5,598        10%          16%
                            --------   --------   --------     -------      -------
  Total International.....   122,409    133,288    151,780      10,879       18,492         9%          14%
                            --------   --------   --------     -------      -------
  Net Revenue.............  $224,074   $236,063   $261,532     $11,989      $25,469         5%          11%
                            ========   ========   ========     =======      =======
Percent of Net Revenues
United States.............        45%        44%        42%
International.............        55%        56%        58%
                            --------   --------   --------
  Net Revenue.............       100%       100%       100%
                            ========   ========   ========

</Table>


     Net revenue growth in 2005 and 2006 reflected the increased demand for
certain data mining products, statistical products and a strong renewal base for
the Company's products. Additional net revenue growth in 2006 reflects the
increased demand for certain market research and statistical products and a
strong renewal base for the Company's products, particularly in the Company's
international markets.

  2005 Compared with 2006

     Net revenues derived internationally increased 14% from 2005 to 2006. This
increase resulted from expansion in generally all significant international
markets including the United Kingdom, the Netherlands, Japan, Germany, France,
Belgium, Southeast Asia and Australia. The increases in international revenues
were partially offset by changes in foreign currency exchange rates which
resulted in a decrease in international revenues of $0.1 million in 2006
compared with 2005. Significant foreign currency impacts on 2006 net revenues
included increases of $0.4 million in the United Kingdom, $0.3 million in the
Netherlands and $0.2 million in other European offices

                                       21

<PAGE>

offset by decreases of $1.1 million in the Pacific Rim. Net revenues derived
from the United States increased by 7% from 2005 to 2006 reflecting increases in
license and maintenance revenue.

  2004 Compared with 2005

     Net revenues derived internationally increased 9% from 2004 to 2005. This
increase resulted from expansion in generally all significant international
markets including the Netherlands, United Kingdom, Japan, Germany, Spain,
Belgium and Southeast Asia, partially offset by a decrease in France. Net
revenues derived from the United States increased by 1% from 2004 to 2005
because the timing of deferred revenue negatively impacted United States revenue
by $6.3 million, or 6%, in 2005 compared with 2004.

  COST OF LICENSE AND MAINTENANCE REVENUES


<Table>
<Caption>
                                          PERIOD
                               ---------------------------
                                 YEAR ENDED DECEMBER 31,          AMOUNT CHANGE           PERCENTAGE CHANGE
                               ---------------------------   -----------------------   -----------------------
                                 2004      2005      2006    '04 VS '05   '05 VS '06   '04 VS '05   '05 VS '06
                               -------   -------   -------   ----------   ----------   ----------   ----------
                                      (IN THOUSANDS)

<S>                            <C>       <C>       <C>       <C>          <C>          <C>          <C>

Cost of License and
  Maintenance Revenues.......  $14,642   $16,381   $17,479     $1,739       $1,098         12%           7%
  Percent of Total Revenues..        7%        7%        7%
</Table>


     Cost of license and maintenance revenues consists of costs of goods sold,
amortization of capitalized software development costs and royalties paid to
third parties. The increase in cost of license and maintenance revenues from
2005 to 2006 was primarily due to higher royalty expense associated with higher
revenue and higher amortization expense of capitalized software development
costs.

     The increase in cost of license and maintenance revenues from 2004 to 2005
was primarily due to higher costs associated with the increase in license
revenues and higher amortization of capitalized acquired technology assets in
connection with the release of new products.

  COST OF LICENSE AND MAINTENANCE REVENUES -- SOFTWARE WRITE-OFFS


<Table>
<Caption>
                                              PERIOD
                                    -------------------------
                                     YEAR ENDED DECEMBER 31,         AMOUNT CHANGE           PERCENTAGE CHANGE
                                    -------------------------   -----------------------   -----------------------
                                     2004     2005      2006    '04 VS '05   '05 VS '06   '04 VS '05   '05 VS '06
                                    ------   ------   -------   ----------   ----------   ----------   ----------
                                          (IN THOUSANDS)

<S>                                 <C>      <C>      <C>       <C>          <C>          <C>          <C>

Cost of License and Maintenance
  Revenues-Software Write-offs....   $ --     $ --     $1,283      $ --        $1,283         -- %         NM
  Percent of Total Revenues.......     -- %     -- %      -- %
</Table>


     During 2006, the Company wrote off certain software to a fair value of zero
after the Company determined that the future use of this software was no longer
likely.

  SALES, MARKETING AND SERVICES


<Table>
<Caption>
                                        PERIOD
                            ------------------------------
                                YEAR ENDED DECEMBER 31,           AMOUNT CHANGE           PERCENTAGE CHANGE
                            ------------------------------   -----------------------   -----------------------
                              2004       2005       2006     '04 VS '05   '05 VS '06   '04 VS '05   '05 VS '06
                            --------   --------   --------   ----------   ----------   ----------   ----------
                                    (IN THOUSANDS)

<S>                         <C>        <C>        <C>        <C>          <C>          <C>          <C>

Sales, Marketing and
  Services................  $129,987   $117,872   $124,127    $(12,115)     $6,255         (9)%          5%
  Percent of Total
     Revenues.............        58%        50%        47%
</Table>


     The increase in sales, marketing and services expenses from 2005 to 2006
was primarily due to higher travel and organization meeting costs, higher
compensation costs associated with higher revenues and increased costs due to
share-based expense of $2.0 million arising out of the implementation of SFAS
No. 123(R) in 2006.


                                       22

<PAGE>

     The decrease in sales, marketing and services expenses from 2004 to 2005
was primarily due to lower staff and occupancy costs resulting from office
consolidation, lower service expenses due to decreased service sales volume,
lower AOL service costs of $3.1 million and a decrease of $0.2 million from the
effects of fluctuations in foreign currency exchange rates. In addition, the
Company incurred severance costs of $1.3 million in 2004 associated with
personnel changes in the Company's sales and professional services organization.

  RESEARCH AND DEVELOPMENT


<Table>
<Caption>
                                          PERIOD
                                --------------------------
                                  YEAR ENDED DECEMBER 31,         AMOUNT CHANGE           PERCENTAGE CHANGE
                                --------------------------   -----------------------   -----------------------
                                  2004      2005     2006    '04 VS '05   '05 VS '06   '04 VS '05   '05 VS '06
                                -------   -------   ------   ----------   ----------   ----------   ----------
                                      (IN THOUSANDS)

<S>                             <C>       <C>       <C>      <C>          <C>          <C>          <C>

Research and Development......  $47,765   $45,418   51,595     $(2,347)     $6,177         (5)%         14%
  Percent of Total Revenues...       21%       19%      20%
</Table>


     The increase in research and development expenses from 2005 to 2006 was
primarily due to severance costs of $0.9 million as a result of consolidating
activities (see Note 13). Additional increases are due to annual compensation
merit increases and increased costs due to share-based expense of $1.4 million
arising out of the implementation of SFAS No. 123(R) in 2006.

     The decrease in research and development expenses from 2004 to 2005
primarily reflected a decline in the United States chiefly due to improved
productivity and rationalization of resources principally through office
consolidation.

  GENERAL AND ADMINISTRATIVE


<Table>
<Caption>
                                          PERIOD
                               ---------------------------
                                 YEAR ENDED DECEMBER 31,          AMOUNT CHANGE           PERCENTAGE CHANGE
                               ---------------------------   -----------------------   -----------------------
                                 2004      2005      2006    '04 VS '05   '05 VS '06   '04 VS '05   '05 VS '06
                               -------   -------   -------   ----------   ----------   ----------   ----------
                                      (IN THOUSANDS)

<S>                            <C>       <C>       <C>       <C>          <C>          <C>          <C>

General and Administrative...  $24,813   $28,217   $32,582     $3,404       $4,365         14%          15%
  Percent of Total Revenues..       11%       12%       12%
</Table>


     The increase in general and administrative expenses from 2005 to 2006 was
primarily due to increased costs due to share-based expense of $3.3 million
arising out of the implementation of SFAS No. 123(R) in 2006, higher
compensation due to improved performance and higher professional service
expense. In 2005, the Company incurred a one-time charge of $1.5 million related
to exit costs for certain office space that was no longer used.

     The increase in general and administrative expenses from 2004 to 2005 was
primarily due to the costs associated with complying with the Sarbanes-Oxley Act
of 2002 and higher compensation cost due to improved performance. In addition,
the Company incurred a one-time charge of $1.5 million in 2005 related to exit
costs for certain office space that was no longer used. In 2004, the Company
wrote-off a $1.0 million long-term receivable due to customer insolvency and
recorded a gain of $0.6 million on the sale of property held in the United
Kingdom.

  PROVISION FOR DOUBTFUL ACCOUNTS


<Table>
<Caption>
                                                PERIOD
                                     ---------------------------
                                       YEAR ENDED DECEMBER 31,          AMOUNT CHANGE           PERCENTAGE CHANGE
                                     ---------------------------   -----------------------   -----------------------
                                       2004      2005      2006    '04 VS '05   '05 VS '06   '04 VS '05   '05 VS '06
                                     -------   -------   -------   ----------   ----------   ----------   ----------
                                            (IN THOUSANDS)

<S>                                  <C>       <C>       <C>       <C>          <C>          <C>          <C>

Provision for Doubtful Accounts....    $291      $151      $163       $(140)        $12          (48)%         8%
  Percent of Total Revenues........     -- %      -- %      -- %
</Table>


     The increase in the provision for doubtful accounts of 8% from 2005 to 2006
is attributable to increased revenues of 11%. The decrease in the provision for
doubtful accounts from 2004 to 2005 is due to improvements in receivables
collections.


                                       23

<PAGE>

  NET INTEREST AND INVESTMENT INCOME (EXPENSE)


<Table>
<Caption>
                                            PERIOD
                                   -----------------------
                                   YEAR ENDED DECEMBER 31,        AMOUNT CHANGE           PERCENTAGE CHANGE
                                   -----------------------   -----------------------   -----------------------
                                    2004     2005    2006    '04 VS '05   '05 VS '06   '04 VS '05   '05 VS '06
                                   ------   -----   ------   ----------   ----------   ----------   ----------
                                        (IN THOUSANDS)

<S>                                <C>      <C>     <C>      <C>          <C>          <C>          <C>

Net Interest and Investment
  (Expense) Income...............   $(282)   $161   $3,139      $443        $2,978         NM           NM
  Percent of Total Revenues......     -- %    -- %       1%
</Table>


     The increase in net interest income from 2005 to 2006 is principally due to
higher investment cash balances. In addition, the Company's interest expense
decreased from 2005 to 2006 due to the repayment of the remainder of the
Company's term loan during the first quarter of 2006. The change from net
interest expense in 2004 to net interest income in 2005 was principally the
result of lower debt due to scheduled debt repayments under line of credit
agreements and the increase in interest income earned as a result of higher cash
balances.

  GAIN ON DIVESTITURE OF SIGMA-SERIES PRODUCT LINE


<Table>
<Caption>
                                                  PERIOD
                                       ---------------------------
                                         YEAR ENDED DECEMBER 31,          AMOUNT CHANGE         PERCENTAGE CHANGE
                                       ---------------------------   ----------------------  ----------------------
                                         2004      2005      2006    '04 VS '05  '05 VS '06  '04 VS '05  '05 VS '06
                                       -------   -------   -------   ----------  ----------  ----------  ----------
                                              (IN THOUSANDS)

<S>                                    <C>       <C>       <C>       <C>         <C>         <C>         <C>

Gain on Divestiture of Sigma-series
  Product Line.......................    $82      $1,000    $1,000      $918         $--         NM          NM
  Percent of Total Revenues..........     --%          1%       --%
</Table>


     In December 2003, SPSS entered into a distribution license and sale of
assets agreement related to its Sigma-series product line with Systat. This
transaction was completed in December 2003. See Note 7 for an explanation of the
terms of this transaction.

     During the third quarter of 2006, Systat made a final payment of $1.0
million to SPSS to exercise Systat's option to purchase the licensed property.
This $1.0 million payment was recorded as other income. The 2005 gain
represented a $1.0 million gain on the sale of the Sigma-series product line
from cash received in December 2005. SPSS deferred gain recognition of this $1.0
million until these funds were received because this amount was scheduled for
payment more than two years after the initial agreement date. The 2004 gain
represented the adjustment of certain professional fee accruals related to the
sale.

  OTHER INCOME (EXPENSE)


<Table>
<Caption>
                                         PERIOD
                               --------------------------
                                 YEAR ENDED DECEMBER 31,         AMOUNT CHANGE         PERCENTAGE CHANGE
                               --------------------------   ----------------------  ----------------------
                                2004      2005      2006    '04 VS '05  '05 VS '06  '04 VS '05  '05 VS '06
                               ------   -------   -------   ----------  ----------  ----------  ----------
                                     (IN THOUSANDS)

<S>                            <C>      <C>       <C>       <C>         <C>         <C>         <C>

Other Income (Expense).......  $1,680   $(2,013)  $(3,981)    $(3,693)    $(1,968)      NM          98%
  Percent of Total Revenues..       1%       (1)%      (2)%
</Table>


     Other expense in 2006 was primarily due to losses from foreign currency.
The losses were principally due to the decline in value of U.S. dollar-
denominated receivables held in international locations principally related to
the British Pound and Euro and British Pound-denominated receivables held in
international locations principally related to the Japanese Yen and Euro.

     Other expense in 2005 was also primarily due to losses from foreign
currency. These losses were due to the decline in value of U.S. dollar-
denominated receivables held in international locations principally related to
the British Pound and the Euro denominated currencies.

     Other income in 2004 was primarily due to gains on foreign currency due to
the weakening of the dollar against other major currencies. SPSS also recognized
a $1.0 million European research and development incentive credit received from
the French Government in 2004 relating to expenditures accumulated through 1999.


                                       24

<PAGE>

  PROVISION FOR INCOME TAXES


<Table>
<Caption>
                                       PERIOD
                             --------------------------
                               YEAR ENDED DECEMBER 31,         AMOUNT CHANGE           PERCENTAGE CHANGE
                             --------------------------   -----------------------   -----------------------
                              2004      2005      2006    '04 VS '05   '05 VS '06   '04 VS '05   '05 VS '06
                             ------   -------   -------   ----------   ----------   ----------   ----------
                                   (IN THOUSANDS)

<S>                          <C>      <C>       <C>       <C>          <C>          <C>          <C>

Provision for Income
  Taxes...................   $2,513   $11,080   $19,321     $8,567       $8,241         341%         74%
  Percent of Pre-Tax
     Income...............       31%       41%       56%
</Table>


     The income tax provision increased from 2005 to 2006 due to an increase in
earnings. Additionally, during the fourth quarter 2006, the Company became aware
of information related to its ongoing worldwide tax audits that has caused it to
determine that certain tax attributes on its balance sheet may no longer be able
to be realizable. The Company has estimated the possible loss of these tax
attributes to be $6.9 million and has recognized an income tax expense in 2006
with a corresponding decrease in selected tax attributes on its balance sheet
(see Note 12). As a percent of pre-tax income, the provision for income taxes
represented a tax rate of approximately 56%.

     The income tax provision increased from 2004 to 2005 primarily due to an
increase in earnings. Other factors accounting for the increase from 2004 to
2005 included an increase in foreign income, an increase in deferred tax asset
valuation allowance and certain book to tax adjustments resulting from the
reconciliation of historical deferred account balances deemed to be immaterial
to prior years.

     Generally, the Company expects its effective tax rate to be 36% to 39%.

LIQUIDITY AND CAPITAL RESOURCES

     During 2006, SPSS generated cash in excess of its operating requirements.
As of December 31, 2006, SPSS had $140.2 million in cash and cash equivalents
compared with $84.4 million at December 31, 2005. Factors affecting cash and
cash equivalents during 2006 include:

  Operating Cash Flows:

     - Cash derived from operating activities was $48.2 million. This cash
       resulted primarily from net income partially offset by timing of accounts
       payable disbursements, receivable billing and income tax payments.

     - Accounts receivable decreased operating cash flow by $8.9 million
       reflecting higher revenue and less favorable collections. Average days
       sales outstanding were 70 days at December 31, 2006, compared to 63 days
       at December 31, 2005.

     - Timing of accounts payable disbursements required $3.4 million of cash.

     - Changes in deferred taxes and income taxes added $9.8 million and $2.8
       million, respectively.

     - Increases in deferred revenue contributed $5.9 million to cash from
       operating activities.

  Investing Activities:

     - Capital expenditures were $4.3 million in 2006.

     - Capitalized software costs were $12.8 million in 2006.

     - Proceeds from the divesture of the Sigma-Series product line were $1.0
       million in 2006.

  Financing Activities:

     - Financing activities provided cash proceeds of $19.9 million from the
       issuance of common stock, primarily through the exercise of stock
       options.

     - The Company paid off the remaining balance of its term loan in the amount
       of $3.4 million.


                                       25

<PAGE>

     Cash flows from operating activities in 2006 were more than adequate to
fund capital expenditures and software development costs of $17.1 million.
Management believes that the Company has ample capacity in its property and
equipment to meet expected needs for future growth.

     Certain unique cash-related events occurred in 2004, 2005 and 2006. The
Company received scheduled payments totaling $3.0 million in 2004, $1.0 million
in 2005 and $1.0 million in 2006, respectively, on the sale of its Sigma-series
product line, which consummated in December 2003. During 2004, the Company
repurchased common stock related to its acquisition of Data Distilleries for
$5.4 million, and received $2.6 million of proceeds from the disposal of a
property in the United Kingdom.

     On March 31, 2003, SPSS entered into a four (4) year, $25.0 million credit
facility with Wells Fargo Foothill, Inc. (f/k/a Foothill Capital Corporation).
The Wells Fargo Foothill facility includes a four (4) year term loan in the
amount of $10.0 million, two revolving lines of credit and a letters of credit
facility not to exceed $3.0 million. The maximum amount SPSS may borrow under
Revolver A will depend upon the value of the Company's eligible accounts
receivable generated within the United States. Revolver B provides for a credit
facility of up to $3.5 million provided that no event of default exists. As of
December 31, 2006, the Company has availability of $6.4 million under the
revolving lines of credit.

     The terms and conditions of the Wells Fargo Foothill credit facility are
specified in a Loan and Security Agreement, dated as of March 31, 2003, by and
between Wells Fargo Foothill and SPSS. The term loan portion of the facility
bears interest at a rate of 2.5% above prime, with potential future reductions
of up to 0.5% in the interest rate based upon the Company's achievement of
specified EBITDA targets. One component of the revolving line of credit will
bear interest at a rate of prime plus 3.0%. On the remainder of the revolving
line of credit, SPSS may select interest rates of either prime plus 0.25% or
LIBOR plus 2.5% with respect to each advance made by Wells Fargo Foothill. The
credit fee rate for letters of credit is 2.0% per annum times the daily balance
of the undrawn amount of all outstanding letters of credit. In May 2003, the
Company began paying down the term loan of $10.0 million in equal annual
installments over the scheduled four (4) year repayment period. During the first
quarter of 2006, the Company paid off the remaining balance of its term loan in
the amount of $3.4 million.

     The Wells Fargo Foothill facility requires SPSS to meet certain financial
covenants including minimum EBITDA targets and includes additional requirements
concerning, among other things, the Company's ability to incur additional
indebtedness, create liens on assets, make investments, engage in mergers,
acquisitions or consolidations where SPSS is not the surviving entity, sell
assets, engage in certain transactions with affiliates, and amend its
organizational documents or make changes in capital structure.

     The Wells Fargo Foothill facility is secured by all of the Company's assets
located in the United States. ShowCase Corporation, a Minnesota corporation and
wholly owned subsidiary of SPSS, and NetGenesis Corp., a Delaware corporation
and wholly owned subsidiary of SPSS, have guaranteed the obligations of SPSS
under the Loan and Security Agreement. This guaranty is secured by all of the
assets of ShowCase and NetGenesis.

     The Company's credit facility with Wells Fargo Foothill expires on March
31, 2007. The Company may seek to obtain a replacement line of credit.

     SPSS intends to fund its future capital needs through operating cash flows
and cash and cash equivalents on hand. SPSS anticipates that these amounts will
be sufficient to fund the Company's operations and capital requirements at the
current level of operations. However, no assurance can be given that changing
business circumstances will not require additional capital for reasons that are
not currently anticipated or that the necessary additional capital will then be
available to SPSS on favorable terms or at all.


                                       26

<PAGE>

SUMMARY DISCLOSURES ABOUT CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS

     The following table reflects a summary of the Company's contractual
obligations to make cash payments in future years measured as of December 31,
2006 (in thousands):


<Table>
<Caption>
                                                          PAYMENT DUE BY PERIOD
                                         -------------------------------------------------------
                                                   LESS THAN                           MORE THAN
                                          TOTAL      1 YEAR    1-3 YEARS   3-5 YEARS    5 YEARS
                                         -------   ---------   ---------   ---------   ---------

<S>                                      <C>       <C>         <C>         <C>         <C>

Notes payable.........................   $    --     $   --     $    --     $    --      $   --
Capital lease obligations.............        --         --          --          --          --
Operating lease obligations(1)........    44,423      9,699      15,738      13,201       5,785
Purchase obligations and other
  commitments.........................        --         --          --          --          --
Other long-term liabilities...........        --         --          --          --          --
                                         -------     ------     -------     -------      ------
  Total...............................   $44,423     $9,699     $15,738     $13,201      $5,785
                                         =======     ======     =======     =======      ======

</Table>


--------

   (1) See Note 8 of the Notes to Consolidated Financial Statements for a
       description of the Company's operating lease obligations.

INTERNATIONAL OPERATIONS

     Revenues from international operations increased from 55% to 56% of total
net revenues between 2004 and 2005, and were approximately 58% of total net
revenues in 2006. As international revenues increase, the Company may experience
increasing risk with regards to foreign currency exchange rates. To reduce this
risk, the Company entered into forward contracts during the third quarter of
2006 for the purpose of hedging future foreign currency exposure on intercompany
balances between certain of its subsidiaries. The principal currency hedged is
the Japanese Yen relative to the British Pound. These contracts call for the
purchase of local currencies at a specified future date to settle the
intercompany balance between the Company's U.K. and Japan-based subsidiaries.
The settlement date for these contracts is June 18, 2007. The Company does not
hedge its foreign currency exposure in a manner that would entirely eliminate
the effects of changes in foreign currency exchange rates on the Company's
consolidated net income. Accordingly, the Company's reported revenues and net
income have been, and in the future may be affected by, the changes in foreign
currency exchange rates. The Company does not use derivative instruments for
speculative or trading purposes.

     During 2006, SPSS generated operating income of $34.3 million. The Company
generated operating income of $31.3 million outside of the United States. Of the
non-U.S. income, SPSS derived operating income of $6.4 million in Euro nations,
operating income of $15.7 million in the United Kingdom, which utilizes the
British Pound, and operating income of $5.7 million in Japan which utilizes the
Japanese Yen. The average exchange rate for the Euro, the British Pound and the
Japanese Yen fluctuates relative to the dollar. These exchange rate fluctuations
impact the Company's operating income which is calculated in U.S. dollars. The
Euro: Dollar exchange rates, the GBP: Dollar exchange rates and the Yen: Dollar
exchange rates impacted operating income differently in 2006 and 2005. The
exchange rate impacts on operating income in 2006 relative to 2005 were as
follows; an increase of $0.1 million for Euro nations due to a 0.9% variance in
exchange rates in the respective period, an increase of $0.2 million in the
United Kingdom, which utilizes the British pound, due to a 1.3% variance in
exchange rates in the respective period and a decrease of $0.3 million in Japan,
which utilizes the Japanese Yen, due to a 5.5% variance in exchange rates in the
respective period.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

     The Company's consolidated financial statements have been prepared in
accordance with accounting principles generally accepted in the United States of
America. The preparation of these financial statements requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities

                                       27

<PAGE>

and the disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period.

     On an on-going basis, management evaluates its estimates and judgments,
including those related to revenue recognition, capitalized software development
costs, and the valuation of accounts receivable, long-lived assets and deferred
income taxes. Management bases its estimates and judgments on historical
experience and on various other factors that are believed to be reasonable under
the circumstances, the results of which form the basis for making judgments
about the carrying values of assets and liabilities. Actual results may differ
from these estimates under different assumptions or conditions. Management
believes the following critical accounting policies, among others, affect its
more significant judgments and estimates used in the preparation of its
consolidated financial statements.

REVENUE RECOGNITION

     SPSS makes significant judgments related to revenue recognition. For each
arrangement, the Company makes significant judgments regarding the fair value of
multiple elements contained in its arrangements, if its fees are fixed or
determinable, and whether or not the collection of payment is probable. SPSS
also makes significant judgments when accounting for concurrent transactions
with customers and in its accounting for potential product returns. These
judgments and their possible effects on revenue recognition are discussed below.

     SPSS primarily recognizes revenue from the following:

     - Product licenses.  SPSS offers (a) annual licenses with maintenance
       renewable annually, (b) perpetual licenses with both annual and multi-
       year maintenance, and (c) multi-year licenses with multi-year
       maintenance;

     - Postcontract customer support ("PCS" or "maintenance") agreements which
       consist primarily of fees for providing when-and-if-available unspecified
       software upgrades and technical support over a specified term;

     - Fixed-price service-related arrangements which are primarily comprised of
       consulting, implementation services and training;

     - Various combinations of the above elements.

     - Distribution partners.  The Company licenses third-parties to distribute
       SPSS products in certain territories internationally or as value-added
       resellers worldwide. SPSS records license fees from transactions made by
       such distribution partners when these transactions are reported, and the
       partners are responsible for providing related maintenance services,
       including end-user support and software updates. However, SPSS has post
       contract support (PCS) obligations to the customers of its distribution
       partners that are implied by its responsibility to provide these partners
       with updates of SPSS products when and if developed. Because the Company
       cannot establish vendor specific objective evidence (VSOE) of fair value
       of these implied maintenance arrangements, the Company recognizes the
       related license fees ratably over the terms of the arrangements beginning
       when transactions are reported to the Company by its distribution
       partners and when all revenue recognition criteria are met. Specific
       revenue recognition on distributor partner contracts will be defined by
       the terms of the contract as follows:

       - Where SPSS defines the price for renewal of maintenance and support in
         the contract, such amount represents vendor specific objective evidence
         (VSOE) of fair value of maintenance and such amount will be deferred
         and recognized ratably over the life of the support contract.

       - When SPSS provides direct maintenance and support to the end-user, SPSS
         will defer the estimated fair value of the maintenance and support
         consistent with direct sales to its customers.

       - When neither of the above conditions exist and SPSS must provide free
         updates or second tier support to the partner, the revenue from the
         contract will be deferred and recognized ratably over the life of the
         contract.

       - Where no maintenance or support of any kind are required by the
         contract, no revenue will be deferred.


                                       28

<PAGE>

       - When a reseller has a right to return product stock for updated product
         stock (stock swap), SPSS will account this as a right of return in
         accordance with SFAS No. 48, Revenue Recognition When Right of Return
         Exists, and establish a reserve for the estimated amount of the
         returns.

  MULTIPLE ELEMENT ARRANGEMENTS

     SPSS typically enters into arrangements with customers that include
perpetual software licenses, maintenance and technical support. Some
arrangements may also include consulting and training services. Software
licenses are sold as site licenses or on a per copy basis. Site licenses give
customers the right to copy licensed software on either a limited or unlimited
basis during a specified term. Per copy licenses give customers the right to use
a single copy of licensed software. The Company makes judgments regarding the
fair value of each element in the arrangement based upon selling prices of the
items when sold separately and generally accounts for each element separately.

  THE FEE IS FIXED OR DETERMINABLE

     SPSS makes judgments at the beginning of an arrangement regarding whether
or not the fees are fixed or determinable. The Company's customary payment terms
are generally within 30 days after invoice date. Arrangements with payment terms
extending beyond one year after invoice date are not considered fixed or
determinable, in which case revenue is recognized as the fees become due and
payable.

  COLLECTION IS PROBABLE

     The Company makes judgments at the beginning of an arrangement regarding
whether or not collection is probable. Probability of collection is assessed on
a case-by-case basis. SPSS typically sells to customers with whom it has a
history of successful collections. New customers may be subject to a credit
review process to assess their financial position and ability to pay. If it is
determined that collection is not probable, then revenue is recognized upon
receipt of payment.

  PRODUCT RETURNS

     SPSS estimates potential future product returns based on the analysis of
historical return rates and reduces current period revenue accordingly. Actual
returns may vary from estimates if a change from historical sales and returns
patterns occur or if there are unanticipated changes in competitive or economic
conditions that affect actual returns.

  DELIVERY OF SOFTWARE PRODUCTS

     Delivery of the Company's products is a prerequisite to the recognition of
software license revenue. SPSS considers such delivery complete when the
software products have been shipped, the customer has access to the license code
that activates the software, or shipment is confirmed by a third-party shipping
agent. If arrangements include an acceptance provision, then revenue is
recognized upon the earlier of the receipt of written customer acceptance or, if
applicable, the expiration of the acceptance period.

     The Company applies AICPA Statement of Position ("SOP") 97-2 (SOP 97-2),
Software Revenue Recognition, and related interpretations and amendments which
specifies the criteria that must be met prior to SPSS recognizing revenues from
software sales.

     SPSS reviews revenue recognition based upon the contract type or
combination of contract types and assesses individual events and changes in
circumstances that could modify recognition of revenue in accordance with SOP
97-2 and related interpretations and amendments. The Company's customary terms
are FOB shipping point. SPSS estimates and records provisions for revenue
returns and allowances in the period the related products are sold based upon
historical experience. To the extent actual results differ from the estimated
amounts, results could be adversely affected. See Note 1 for additional
information regarding Revenue Recognition.


                                       29

<PAGE>

CAPITALIZATION OF CERTAIN SOFTWARE DEVELOPMENT COSTS

     Software development costs incurred by SPSS in connection with the
Company's long-term development projects are capitalized in accordance with SFAS
No. 86, Accounting for the Costs of Computer Software to Be Sold, Leased, or
Otherwise Marketed. SPSS has not capitalized software development costs relating
to development projects where the net realizable value is immaterial and the
time between technological feasibility and release is of short duration. SPSS
reviews capitalized software development costs each period and, if necessary,
reduces the carrying value of each product to its net realizable value.

     SPSS applies SOP 98-1, Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use. This standard requires that certain
costs related to the development or purchase of internal-use software be
capitalized and amortized over the estimated useful life of the software. SOP
98-1 also requires that costs related to the preliminary project stage and post-
implementation/operations stage of an internal-use computer software development
project be expensed as incurred. During 2004, 2005 and 2006, SPSS capitalized
$0.8 million, $0.4 million and $0.1 million, respectively, and amortized $1.4
million, $1.2 million and $1.0 million, respectively, of internal-use computer
software.

ACCOUNTS RECEIVABLE

     SPSS management must make estimates of accounts receivable that will not be
collected. SPSS performs ongoing credit evaluations of its customers and adjusts
credit limits based upon payment history and the customer's creditworthiness, as
determined by the Company's review of their current credit information. SPSS
continuously monitors past due status, delinquency status, collections and
payments from its customers and maintains a provision for estimated credit
losses based upon historical experience and any specific customer collection
issues that it has identified. While such credit losses have historically been
within management's expectations and the provisions established, SPSS cannot
guarantee that it will continue to experience the same credit loss rates as in
the past. If the financial condition of SPSS customers were to deteriorate,
resulting in an impairment of their ability to make payments, additional
allowances may be required.

IMPAIRMENT OF LONG-LIVED ASSETS

     SPSS assesses the impairment of identifiable intangibles, long-lived assets
and goodwill whenever events or changes in circumstances indicate that the
carrying value may not be recoverable. In addition, goodwill must be assessed on
at least an annual basis. Factors SPSS considers important which could trigger
an impairment review include significant underperformance relative to expected
historical or projected future operating results, significant changes in the
manner of use of the acquired assets or the strategy for the Company's overall
business and significant negative industry or economic trends.

     When SPSS determines that the carrying value of amortizable intangibles and
long-lived assets may not be recoverable based upon the existence of one or more
of the above indicators of impairment, SPSS would use an estimate of
undiscounted future cash flows that the asset is expected to generate to measure
whether the asset is recoverable over its estimated useful life. If estimated
undiscounted future cash flows are less than the carrying amount of the asset,
the asset is considered impaired and an expense is recorded in an amount
required to reduce the carrying amount of the asset to its then fair value. To
the extent actual business values or cash flows differ from those estimated
amounts, the recoverability of those long-lived assets could be affected.

INCOME TAXES

     SPSS recognizes deferred tax assets and liabilities based on the
differences between the financial statement carrying amounts and the tax bases
of assets and liabilities. The Company regularly reviews its deferred tax assets
for recoverability and establishes a valuation allowance based on historical
taxable income, projected future taxable income, and the expected timing of the
reversals of existing temporary differences to reduce its deferred tax assets to
the amount that it believes is more likely than not to be realized. SPSS has
considered future taxable income and ongoing prudent and feasible tax planning
strategies in assessing the need for the valuation allowance. The Company has
not provided a valuation allowance on the amount of deferred tax assets that it
estimates will be utilized as a result of the execution of these strategies. If
the future taxable income is less than the amount that has

                                       30

<PAGE>

been assumed in assessing the recoverability of the deferred tax assets, then an
increase in the valuation allowance will be required, with a corresponding
increase to income tax expense. Likewise, should SPSS ascertain in the future
that it is more likely than not that deferred tax assets will be realized in
excess of the net deferred tax assets, all or a portion of the $64.7 million
valuation allowance as of December 31, 2006 would be reversed as a benefit to
the provision for income taxes in the period such determination was made.

SHARE-BASED COMPENSATION

     As discussed in the Summary of Significant Accounting Policies in Note 1 to
the Consolidated Financial Statements in this Form 10-K, effective January 1,
2006, the Company adopted the fair value recognition provisions of Statement of
Financial Accounting Standards No. 123(R), "Share-Based Payment" ("SFAS No.
123(R)"), using the modified prospective transition method. Under that
transition method, compensation expense recognized in 2006 includes: (a)
compensation expense for all share-based payments granted prior to, but not yet
vested as of January 1, 2006, based on the grant date fair value estimated in
accordance with the original provisions of SFAS No. 123, and (b) compensation
expense for all share-based payments granted subsequent to January 1, 2006,
based on the grant date fair value estimated in accordance with the provisions
of SFAS No. 123(R). Determining the fair value of share-based awards at the
grant date requires judgment to identify the appropriate valuation model and
estimate the assumptions, including the expected term of the stock options,
expected stock-price volatility and dividend yield, to be used in the
calculation. Judgment is also required in estimating the percentage of share-
based awards that are expected to be forfeited. The Company estimated the fair
value of stock options granted using the Black-Scholes pricing valuation model
with assumptions based primarily on historical data. If actual results differ
significantly from these estimates, share-based compensation expense and our
results of operations could be materially impacted. Prior to January 1, 2006,
the Company accounted for stock option grants made in 2004 and 2005 under the
recognition and measurement provisions of APB Opinion No. 25 and related
interpretations.

FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES

     The Company accounts for derivative financial instruments in accordance
with SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities." The Company recognizes all derivative financial instruments, such
as foreign exchange contracts, in the consolidated financial statements at fair
value. Changes in fair values of derivatives accounted for as fair value hedges
are recorded in income along with the portions of the changes in the fair value
of the hedged items that relate to the hedged risk(s).

OFF-BALANCE SHEET ARRANGEMENTS

     The Company does not have any off-balance sheet arrangements.

RECENT ACCOUNTING PRONOUNCEMENTS

     In June 2006, the FASB issued Interpretation No. 48 (FIN 48), "Accounting
for Uncertainty in Income Taxes -- an Interpretation of SFAS No. 109." FIN 48
clarifies the accounting for uncertainty in income taxes recognized in an
enterprise's financial statements in accordance with SFAS No. 109, "Accounting
for Income Taxes." FIN 48 prescribes a recognition threshold and measurement of
a tax position taken or expected to be taken in an enterprise's tax return. In
addition, FIN 48 provides guidance on derecognition, classification, interest,
penalties, accounting in interim periods and disclosure related to uncertain
income tax positions. FIN 48 is effective for fiscal years beginning after
December 15, 2006. The Company will adopt FIN 48 as of January 1, 2007, as
required. The Company is currently evaluating the impact that the adoption of
FIN 48 will have, if any, on its consolidated financial statements and notes
thereto. However, the Company does not expect the adoption of FIN 48 to have a
material effect on its financial position or operating results.

     In June 2006, the FASB ratified a consensus opinion reached by the Emerging
Issues Task Force (EITF) on EITF Issue 06-3, "How Taxes Collected from Customers
and Remitted to Governmental Authorities Should Be Presented in the Income
Statement (That Is, Gross versus Net Presentation)." The guidance in EITF Issue
06-3 requires disclosure in interim and annual financial statements of the
amount of taxes on a gross basis, if significant, that are assessed by a
governmental authority that are imposed on and concurrent with a specific
revenue producing

                                       31

<PAGE>

transaction between a seller and customer such as sales, use, value added, and
some excise taxes. Additionally, the income statement presentation (gross or
net) of such taxes is an accounting policy decision that must be disclosed. The
consensus in EITF Issue 06-3 is effective for interim and annual reporting
periods beginning after December 15, 2006. The Company intends to adopt EITF
Issue 06-3 effective January 1, 2007, and does not believe that the adoption
will have a material effect on its consolidated financial statements.

     In September 2006, the SEC issued Staff Accounting Bulleting (SAB) No. 108,
"Considering the Effects of Prior Year Misstatements when Quantifying
Misstatements in Current Year Financial Statements." SAB No. 108 provides
interpretive guidance on how the effects of prior-year uncorrected misstatements
should be considered when quantifying misstatements in the current year
financial statements. SAB No. 108 requires registrants to quantify misstatements
using both an income statement and balance sheet approach and evaluate whether
either approach results in a misstatement that, when all relevant quantitative
and qualitative factors are considered, is material. If prior year errors that
have been previously considered immaterial now are considered material based on
either approach, no restatement is required so long as management properly
applied its previous approach and all relevant facts and circumstances were
considered. If prior years are not restated, the cumulative effect adjustment is
recorded in opening accumulated earnings as of the beginning of the fiscal year
of adoption. The Company has reviewed, and implemented, the provisions of SAB
No. 108 as of December 31, 2006, and has determined that it did not have a
material impact on its financial statements.

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     The Company is not currently exposed to market risk from fluctuations in
interest rates because, as of December 31, 2006, the Company had no amounts
outstanding under its borrowing arrangement.

     The Company is exposed to risk from fluctuations in foreign currency
exchange rates. Since a substantial portion of the Company's operations and
revenue occur outside of the United States, and in currencies other than the
U.S. dollar, the Company's results can be significantly affected by changes in
foreign currency exchange rates. Additionally, these changes can significantly
affect intercompany balances that are denominated in different currencies.

     To reduce this risk, the Company entered into forward contracts during the
third quarter of 2006 for the purpose of hedging future foreign currency
exposure on intercompany balances between certain of its subsidiaries. The
objective for holding the derivative instruments is to eliminate or reduce the
impact of these exposures. The principal currency hedged is the Japanese Yen
relative to the British Pound with a notional weighted average exchange rate
between the currencies of 212.12. These contracts call for the purchase of local
currencies at a specified future date to settle the intercompany balance between
the Company's U.K. and Japan-based subsidiaries. The settlement date for these
contracts is June 18, 2007. The Company does not use derivative instruments for
speculative or trading purposes.

     On the date the contracts were entered into, the Company designated them as
fair value hedges. The Company formally documented its hedging relationship,
including identification of the hedging instruments and the hedged items, as
well as its risk management objectives and strategies for undertaking the hedge
transactions. Additionally, at inception, the Company formally assessed that the
transactions will be highly effective in offsetting changes in the fair value of
the hedged items.

     The change in the fair value of the contracts, since they were entered
into, was recorded as a current asset in the Consolidated Balance Sheets. The
fair value is based upon foreign exchange spot rates at the end of the period.
Any changes in the fair value of the instrument were recorded as a component of
other income/expense. As of December 31, 2006, the change in fair value was $0.8
million. The notional amount of the forward contracts as of December 31, 2006
was $10.8 million.

     Were the foreign currency exchange rates to depreciate immediately and
uniformly against the U.S. dollar by 10 percent from levels at December 31,
2006, the reported cash balance would decrease $7.7 million, or 5.5%. Management
expects that the decrease would have a material adverse effect on the Company's
financial results.


                                       32

<PAGE>

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                           SPSS INC. AND SUBSIDIARIES

                                      INDEX



<Table>
<Caption>
                                                                           PAGE
                                                                           ----

<S>                                                                        <C>

Reports of Independent Registered Public Accounting Firms...............    34
Management's Report on Internal Control Over Financial Reporting........    37
Consolidated Balance Sheets as of December 31, 2005 and 2006............    38
Consolidated Statements of Income for the years ended December 31, 2004,
  2005 and 2006.........................................................    39
Consolidated Statements of Comprehensive Income for the years ended
  December 31, 2004, 2005 and 2006......................................    40
Consolidated Statements of Stockholders' Equity for the years ended
  December 31, 2004, 2005 and 2006......................................    41
Consolidated Statements of Cash Flows for the years ended December 31,
  2004, 2005 and 2006...................................................    42
Notes to Consolidated Financial Statements..............................    43
Consolidated Financial Statement Schedule:
Schedule II Valuation and Qualifying Accounts...........................    69
</Table>


     Schedules not filed:

     All schedules other than Schedule II have been omitted as the required
information is inapplicable or the information is presented in the consolidated
financial statements or related notes.


                                       33

<PAGE>

             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders
SPSS Inc.:

     We have audited the accompanying consolidated balance sheets of SPSS Inc.
and Subsidiaries (a Delaware corporation) (the "Company") as of December 31,
2006 and 2005, and the related consolidated statements of income, comprehensive
income, stockholders' equity and cash flows for each of the two years in the
period ended December 31, 2006. 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 in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit also 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, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

     In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of the Company
as of December 31, 2006 and 2005 and the results of its income and cash flows
for each of the two years in the period ended December 31, 2006, in conformity
with accounting principles generally accepted in the United States of America.

     We have also audited Schedule II of the Company for each of the two years
in the period ended December 31, 2006. In our opinion this Schedule presents
fairly, in all material respects, the information required to set forth therein.

     As discussed in Note 15 to the consolidated financials statements, the
Company adopted Statement of Financial Accounting Standards No. 123R, Share-
Based Payment, on January 1, 2006.

     We also have audited, in accordance with the standards of the Public
Company Accounting Oversight Board (United States), the effectiveness of SPSS
Inc.'s internal control over financial reporting as of December 31, 2006, based
on the criteria established in Internal Control -- Integrated Framework issued
by the Committee of Sponsoring Organizations of the Treadway Commission (COSO)
and our report dated March 1, 2007 expressed an unqualified opinion on
management's assessment and an unqualified opinion on the effectiveness of the
company's internal control over financial reporting.

                                               /s/ GRANT THORNTON LLP

Chicago, Illinois
March 1, 2007


                                       34

<PAGE>

             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders of SPSS Inc.:

     We have audited the accompanying consolidated statements of income,
comprehensive income, stockholders' equity, and cash flows of SPSS Inc. and
subsidiaries (SPSS or the Company), for the year ended December 31, 2004. In
connection with our audit of the consolidated financial statements, we also have
audited the consolidated financial statement schedule of valuation and
qualifying accounts. These consolidated financial statements and the
consolidated financial statement schedule are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements and the consolidated financial statement
schedule based on our audit.

     We conducted our audit in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.

     In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the results of the Company's
operations and their cash flows for the year ended December 31, 2004, in
conformity with U.S. generally accepted accounting principles. Also, in our
opinion, the related consolidated financial statement schedule, when considered
in relation to the basic consolidated financial statements taken as a whole,
presents fairly, in all material respects, the information set forth therein.

                                        /s/ KPMG LLP

Chicago, Illinois
March 16, 2005


                                       35

<PAGE>

             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders
SPSS Inc.:

     We have audited management's assessment, included in the accompanying
"Management's Report on Internal Control Over Financial Reporting," that SPSS
Inc. and Subsidiaries (a Delaware corporation) (the "Company") maintained
effective internal control over financial reporting as of December 31, 2006,
based on the criteria established in Internal Control -- Integrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission
(COSO). The Company's management is responsible for maintaining effective
internal control over financial reporting and for its assessment of the
effectiveness of internal control over financial reporting. Our responsibility
is to express an opinion on management's assessment and an opinion on the
effectiveness of the Company's internal control over financial reporting based
on our audit.

     We conducted our audit in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether
effective internal control over financial reporting was maintained in all
material respects. Our audit included obtaining an understanding of internal
control over financial reporting, evaluating management's assessment, testing
and evaluating the design and operating effectiveness of internal control, and
performing such other procedures as we considered necessary in the
circumstances. We believe that our audit provides a reasonable basis for our
opinions.

     A company's internal control over financial reporting is a process designed
to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles. A company's internal control over
financial reporting includes those policies and procedures that (1) pertain to
the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company; (2)
provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of
the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company's
assets that could have a material effect on the financial statements.

     Because of its inherent limitations, internal control over financial
reporting may not prevent or detect misstatements. Also, projections of any
evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the
degree of compliance with the policies or procedures may deteriorate.

     In our opinion, management's assessment that the Company maintained
effective internal control over financial reporting as of December 31, 2006, is
fairly stated, in all material respects, based on the control criteria, as
described in the introductory paragraph. Also in our opinion, the Company
maintained, in all material respects, effective internal control over financial
reporting as of December 31, 2006, based on the control criteria, as described
in the introductory paragraph.

     We also have audited, in accordance with the standards of the Public
Company Accounting Oversight Board (United States), the accompanying balance
sheets of the Company as of December 31, 2006 and 2005, and the related
consolidated statements of income, comprehensive income, stockholders' equity
and cash flows for each of the two years in the period ended December 31, 2006,
and our report dated March 1, 2007 expressed an unqualified opinion on those
financial statements.

                                        /s/ GRANT THORNTON LLP

Chicago, Illinois
March 1, 2007


                                       36

<PAGE>

        MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

     Management is responsible for establishing and maintaining adequate
internal control over financial reporting, as such term is defined in Exchange
Act Rule 13a-15(f) to provide reasonable assurance regarding the reliability of
our financial reporting and the preparation of the financial statements for
external purposes in accordance with U.S. generally accepted accounting
principles. Management assessed the effectiveness of the Company's internal
control over financial reporting as of December 31, 2006, using the criteria
published by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO) in Internal Control -- Integrated Framework.

     A company's internal control over financial reporting is a process designed
to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles. A company's internal control over
financial reporting includes those policies and procedures that (1) pertain to
the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company; (2)
provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of
the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company's
assets that could have a material effect on the financial statements.

     Because of its inherent limitations, internal control over financial
reporting may not prevent or detect misstatements. Also, projections of any
evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the
degree of compliance with the policies or procedures may deteriorate.

     Based on the evaluation under the framework in Internal
Control -- Integrated Framework, management concluded that, as of December 31,
2006, the Company's internal control over financial reporting is effective. Our
independent registered public accounting firm, Grant Thornton LLP, has issued an
attestation report on management's assessment of the Company's internal control
over financial reporting. That report is included in Item 8 of this Annual
Report on Form 10-K.

                                By:              /s/ Jack Noonan
                                    --------------------------------------------
                                                     Jack Noonan
                                        President and Chief Executive Officer

                                By:           /s/ Raymond H. Panza
                                    --------------------------------------------
                                                  Raymond H. Panza
                                         Executive Vice President, Corporate
                                                     Operations,
                                        Chief Financial Officer and Secretary


                                       37

<PAGE>

                             SPSS INC. AND SUBSIDIARIES

                             CONSOLIDATED BALANCE SHEETS
                          (IN THOUSANDS, EXCEPT SHARE DATA)


<Table>
<Caption>
                                                            DECEMBER 31,   DECEMBER 31,
                                                                2005           2006
                                                            ------------   ------------

<S>                                                         <C>            <C>

                                         ASSETS
CURRENT ASSETS:
  Cash and cash equivalents...............................    $ 84,408       $140,203
  Accounts receivable, net of allowances $1,748 in 2005
     and $1,986 in 2006...................................      42,488         53,814
  Inventories, net........................................         879            752
  Deferred income taxes, net..............................       5,624          3,784
  Prepaid income taxes....................................       5,067          3,285
  Other current assets....................................       5,233          4,692
                                                              --------       --------
     Total current assets.................................     143,699        206,530
                                                              --------       --------
Property, equipment and leasehold improvements, net.......      20,441         17,708
Capitalized software development costs, net...............      28,522         31,583
Goodwill..................................................      41,207         41,923
Intangibles, net..........................................       3,627          3,470
Deferred income taxes, net................................      32,938         28,714
Other noncurrent assets...................................       1,463          2,566
                                                              --------       --------
       Total assets.......................................    $271,897       $332,494
                                                              ========       ========

                          LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
  Notes payable...........................................    $  2,500       $     --
  Accounts payable........................................       9,678          6,496
  Income taxes and value added taxes payable..............       9,024         10,249
  Deferred revenues.......................................      63,980         73,483
  Other accrued liabilities...............................      21,102         24,203
                                                              --------       --------
     Total current liabilities............................     106,284        114,431
                                                              --------       --------
Noncurrent notes payable..................................         872             --
Noncurrent deferred income taxes, net.....................         449            795
Noncurrent deferred revenue...............................         546            745
STOCKHOLDERS' EQUITY:
  Common Stock, $0.01 par value; 50,000,000 shares
     authorized; 18,724,649 and 19,774,073 shares issued
     and outstanding in 2005 and 2006, respectively.......         187            198
  Additional paid-in capital (see Note 17)................     177,440        205,912
  Deferred compensation...................................      (1,069)            --
  Accumulated other comprehensive loss....................      (9,420)        (1,335)
  Retained earnings (Accumulated deficit) (see Note 17)...      (3,392)        11,748
                                                              --------       --------
     Total stockholders' equity...........................     163,746        216,523
                                                              --------       --------
       Total liabilities and stockholders' equity.........    $271,897       $332,494
                                                              ========       ========

</Table>



The accompanying notes are an integral part of these consolidated financial
                                   statements.


                                       38

<PAGE>

                           SPSS INC. AND SUBSIDIARIES

                        CONSOLIDATED STATEMENTS OF INCOME
                      (IN THOUSANDS, EXCEPT PER SHARE DATA)


<Table>
<Caption>
                                                           YEAR ENDED DECEMBER 31,
                                                       ------------------------------
                                                         2004       2005       2006
                                                       --------   --------   --------

<S>                                                    <C>        <C>        <C>

Net revenues:
  License............................................  $ 95,819   $107,568   $125,017
  Maintenance........................................    97,735    102,241    109,277
  Services...........................................    30,520     26,254     27,238
                                                       --------   --------   --------
Net revenues.........................................   224,074    236,063    261,532
                                                       --------   --------   --------
Operating expenses:
  Cost of license and maintenance revenues...........    14,642     16,381     17,479
  Cost of license and maintenance
     revenues -- software write-offs.................        --         --      1,283
  Sales, marketing and services......................   129,987    117,872    124,127
  Research and development...........................    47,765     45,418     51,595
  General and administrative.........................    24,813     28,217     32,582
  Provision for doubtful accounts....................       291        151        163
                                                       --------   --------   --------
Operating expenses...................................   217,498    208,039    227,229
                                                       --------   --------   --------
Operating income.....................................     6,576     28,024     34,303
                                                       --------   --------   --------
Other income (expense):
  Net interest and investment income.................      (282)       161      3,139
  Gain on divestiture of Sigma-series product line...        82      1,000      1,000
  Other..............................................     1,680     (2,013)    (3,981)
                                                       --------   --------   --------
Other income (expense)...............................     1,480       (852)       158
                                                       --------   --------   --------
Income before income taxes...........................     8,056     27,172     34,461
Income tax expense...................................     2,513     11,080     19,321
                                                       --------   --------   --------
Net income...........................................  $  5,543   $ 16,092   $ 15,140
                                                       ========   ========   ========
Basic net income per share...........................  $   0.31   $   0.88   $   0.78
                                                       ========   ========   ========
Diluted net income per share.........................  $   0.31   $   0.85   $   0.73
                                                       ========   ========   ========
Shares used in computing basic net income per share..    17,671     18,228     19,451
                                                       ========   ========   ========
Shares used in computing diluted net income per
  share..............................................    17,884     18,880     20,645
                                                       ========   ========   ========

</Table>



The accompanying notes are an integral part of these consolidated financial
                                   statements.


                                       39

<PAGE>

                           SPSS INC. AND SUBSIDIARIES

                 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
                                 (IN THOUSANDS)



<Table>
<Caption>
                                                            YEAR ENDED DECEMBER 31,
                                                          ---------------------------
                                                            2004      2005      2006
                                                          -------   -------   -------

<S>                                                       <C>       <C>       <C>

Net income..............................................  $ 5,543   $16,092   $15,140
Other comprehensive income (loss):
  Foreign currency translation adjustment...............   (1,242)   (1,602)    8,085
                                                          -------   -------   -------
Comprehensive income....................................  $ 4,301   $14,490   $23,225
                                                          =======   =======   =======

</Table>



The accompanying notes are an integral part of these consolidated financial
                                   statements.


                                       40

<PAGE>

                           SPSS INC. AND SUBSIDIARIES

                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                        (IN THOUSANDS, EXCEPT SHARE DATA)



<Table>
<Caption>
                                                           YEAR ENDED DECEMBER 31,
                                                       ------------------------------
                                                         2004       2005       2006
                                                       --------   --------   --------

<S>                                                    <C>        <C>        <C>

Common stock, $.01 par value:
  Balance at beginning of period.....................  $    173   $    177   $    187
  Sale of 23,271, 8,270 and 42,177 shares of common
     stock to the Employee Stock Purchase Plans in
     2004, 2005 and 2006, respectively...............        --         --         --
  Exercise of stock options..........................         4         10         11
                                                       --------   --------   --------
  Balance at end of period...........................       177        187        198
                                                       --------   --------   --------
Additional paid-in capital:
  Balance at beginning of period.....................   148,202    155,729    177,440
  Stock option reclassification (see Note 17)........     3,252         --         --
  Reclassification of deferred compensation upon
     adoption of SFAS No. 123(R).....................        --         --     (1,069)
  Sale of 23,271, 8,270 and 42,177 shares of common
     stock to the Employee Stock Purchase Plans in
     2004, 2005 and 2006, respectively...............       392        112      1,047
  Exercise of 267,623, 1,010,635 and 980,936 stock
     options in 2004, 2005 and 2006, respectively....     3,749     17,422     18,826
  Amortization of stock option compensation..........        --         --      3,105
  Net issuance of 78,200 and 231,387 restricted, and
     deferred, share units in 2005 and 2006,
     respectively....................................        --      1,428      3,129
  Income tax benefit related to stock options........       134      2,749      3,434
                                                       --------   --------   --------
  Balance at end of period...........................   155,729    177,440    205,912
                                                       --------   --------   --------
Deferred compensation:
  Balance at beginning of period.....................      (385)      (145)    (1,069)
  Reclassification of deferred compensation upon
     adoption of SFAS No. 123(R).....................        --         --      1,069
  Net issuance of 78,200 restricted share units in
     2005............................................        --     (1,428)        --
  Amortization of deferred compensation..............       240        504         --
                                                       --------   --------   --------
  Balance at end of period...........................      (145)    (1,069)        --
                                                       --------   --------   --------
Accumulated other comprehensive loss:
  Balance at beginning of period.....................    (6,576)    (7,818)    (9,420)
  Foreign currency translation adjustment............    (1,242)    (1,602)     8,085
                                                       --------   --------   --------
  Balance at end of period...........................    (7,818)    (9,420)    (1,335)
                                                       --------   --------   --------
Accumulated deficit:
  Balance at beginning of period.....................   (21,775)   (19,484)    (3,392)
  Stock option reclassification (see Note 17)........    (3,252)        --         --
  Net income.........................................     5,543     16,092     15,140
                                                       --------   --------   --------
  Balance at end of period...........................   (19,484)    (3,392)    11,748
                                                       --------   --------   --------
Total stockholders' equity...........................  $128,459   $163,746   $216,523
                                                       ========   ========   ========

</Table>



The accompanying notes are an integral part of these consolidated financial
                                   statements.


                                       41

<PAGE>

                           SPSS INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)



<Table>
<Caption>
                                                            YEAR ENDED DECEMBER 31,
                                                        ------------------------------
                                                          2004       2005       2006
                                                        --------   --------   --------

<S>                                                     <C>        <C>        <C>

Cash flows from operating activities:
  Net income..........................................  $  5,543   $ 16,092   $ 15,140
     Adjustments to reconcile net income to net cash
       provided by operating activities:
     Depreciation and amortization....................    16,405     16,948     16,536
     Deferred income taxes............................   (11,190)    (1,711)     9,844
     Excess tax benefit from share-based
       compensation...................................        --         --     (3,434)
     Tax benefit from stock option exercises..........       134      2,749         --
     Amortization of share-based compensation.........       240        504      6,704
     Gain on sale of product line.....................       (82)    (1,000)    (1,000)
     Write-off of internal use software and acquired
       technology.....................................     1,505         --      1,283
     Non-cash survey services expense (recoveries)....    (1,125)        --         --
     Gain from property disposal......................      (771)        --         --
     Changes in assets and liabilities, net of effects
       of acquisitions:
       Accounts receivable............................       969      3,984     (8,872)
       Inventories....................................       691       (125)       136
       Prepaid and other assets.......................      (236)      (147)       676
       Accounts payable...............................    (1,253)     3,841     (3,382)
       Accrued expenses...............................      (423)    (1,488)     2,403
       Income taxes...................................       835      3,991      2,755
       Deferred revenue...............................     1,747      5,916      5,898
  Other, net..........................................      (655)     1,955      3,523
                                                        --------   --------   --------
Net cash provided by operating activities.............    12,334     51,509     48,210
                                                        --------   --------   --------
Cash flows from investing activities:
  Capital expenditures................................    (5,477)    (7,543)    (4,287)
  Capitalized software development costs..............    (9,208)    (9,021)   (12,761)
  Proceeds from the divestiture of Sigma-series
     product line.....................................     3,000      1,000      1,000
  Purchase of business and intangibles................        --       (780)        --
  Repurchase of common stock issued for acquisition...    (5,421)        --         --
  Proceeds from property disposal.....................     2,633         --         --
  Other investing activities..........................       187         --         --
                                                        --------   --------   --------
Net cash used in investing activities.................   (14,286)   (16,344)   (16,048)
                                                        --------   --------   --------
Cash flows from financing activities:
  Net repayments under line-of-credit agreements......    (2,570)    (2,509)    (3,372)
  Proceeds from issuance of common stock..............     4,145     17,544     19,884
  Excess tax benefit from share-based compensation....        --         --      3,434
                                                        --------   --------   --------
Net cash provided by financing activities.............     1,575     15,035     19,946
                                                        --------   --------   --------
Effect of exchange rates on cash......................     1,383     (2,899)     3,687
                                                        --------   --------   --------
Net change in cash and cash equivalents...............     1,006     47,301     55,795
Cash and cash equivalents at beginning of period......    36,101     37,107     84,408
                                                        --------   --------   --------
Cash and cash equivalents at end of period............  $ 37,107   $ 84,408   $140,203
                                                        ========   ========   ========
Supplemental disclosures of cash flow information:
  Interest paid.......................................  $    723   $    691   $    105
  Income taxes paid...................................    14,974      8,546      7,899
  Cash received from income tax refunds...............     2,307      4,496      1,889
</Table>



The accompanying notes are an integral part of these consolidated financial
                                   statements.


                                       42

<PAGE>

                           SPSS INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

  BUSINESS

     SPSS Inc., a Delaware corporation ("SPSS" or the "Company"), was
incorporated in Illinois in 1975 under the name SPSS, Inc. and was
reincorporated in Delaware in May 1993 under the name "SPSS Inc." SPSS is a
global provider of predictive analytics technology and services.

     The Company's offerings use predictive analytics to connect data to
effective action by drawing reliable conclusions about current conditions and
future events. Predictive analytics leverages an organization's business
knowledge by applying sophisticated analytic techniques to enterprise data. The
insights gained through the use of these techniques can lead to improved
business processes that increase revenues, reduce costs, and prevent fraudulent
activities.

     SPSS reports revenues in three categories used by most enterprise software
companies:

     - License fees, representing new sales of the Company's tools,
       applications, and components on a perpetual, annual, or ASP (applications
       services provider) basis;

     - Maintenance, representing recurring revenues recognized by the Company
       from renewals of maintenance agreements associated with perpetual
       licenses or renewals of annual licenses; and

     - Services, representing revenues recognized from professional services
       engagements, training, and other activities such as publication sales and
       providing respondents to online surveys.

  PRINCIPLES OF CONSOLIDATION

     The consolidated financial statements include the accounts of SPSS Inc. and
its wholly owned subsidiaries. Significant intercompany accounts and
transactions have been eliminated.

     The translation of the applicable foreign currencies into U.S. dollars is
performed for balance sheet accounts using current exchange rates in effect at
the balance sheet date and for revenue and expense accounts using the weighted
average exchange rates during the period. The gains or losses resulting from
such translation are included in stockholders' equity. Gains or losses resulting
from foreign currency transactions are included in "other income and expense" in
the consolidated statements of income.

  USE OF ESTIMATES

     The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and judgments that affect the reported amounts of
assets and liabilities, disclosure of contingent assets and liabilities, and
reported amounts of revenue and expenses during the reporting period. Actual
results could differ from those estimates. The principal areas of estimation in
the financial statements include revenue recognition, capitalization of software
development costs, impairment of long-lived assets, credit losses on accounts
receivable, income taxes, contingencies and litigation.

  REVENUE RECOGNITION

     The Company applies AICPA Statement of Position ("SOP") 97-2, Software
Revenue Recognition, and related Amendments which establishes the criteria that
must be met prior to SPSS recognizing revenues from software sales.

     The Company's policy is to record revenue only when these criteria are met:

          (1) Persuasive evidence of an arrangement exists -- SPSS and the
     customer have executed a written agreement, contract or other evidence of
     an arrangement.


                                       43

<PAGE>

          (2) Delivery has occurred -- Product has been shipped or delivered to
     customer, depending on the applicable terms. The Company's standard
     contract does not contain acceptance clauses. In the event that SPSS
     modifies the terms of its standard contract to provide that final delivery
     is contingent upon the customer accepting the applicable product, SPSS does
     not recognize revenue for that product until the customer has accepted the
     product.

          (3) The vendor's fee is fixed or determinable -- The arrangement
     indicates the price of the license and the number of users, and the related
     payment terms are within one year of delivery of the software.

          (4) Collectibility is probable -- SPSS sells to customers it deems
     creditworthy. Standard terms for payment are 30 days. SPSS periodically
     extends payment terms to three to six months, but does not extend payment
     terms past one year. Any terms beyond standard are generally still
     collectible and are generally offered in larger transactions with more
     creditworthy customers.

     SPSS primarily recognizes revenue from product licenses, net of an
allowance for estimated returns and cancellations, at the time the software is
shipped. Revenue from certain product license agreements is recognized upon
contract execution, product delivery, and customer acceptance.

     The Company's customary terms are FOB shipping point. SPSS estimates and
records provisions for revenue returns and allowances in the period the related
products are sold, based upon historical experience.

     Revenue from postcontract customer support ("PCS" or "maintenance")
agreements, including PCS bundled with product licenses, is recognized ratably
over the term of the related PCS agreements. Maintenance revenues consist
primarily of fees for providing when-and-if-available unspecified software
upgrades and technical support over a specified term. Maintenance revenues are
recognized on a straight-line basis over the term of the contract.

     Distribution partners: The Company licenses third-parties to distribute
SPSS products in certain territories internationally or as value-added resellers
worldwide. SPSS records license fees from transactions made by such distribution
partners when these transactions are reported, and the partners are responsible
for providing related maintenance services, including end-user support and
software updates. However, SPSS has post contract support (PCS) obligations to
the customers of its distribution partners that are implied by its
responsibility to provide these partners with updates of SPSS products when and
if developed. Because the Company cannot establish vendor specific objective
evidence (VSOE) of fair value of these implied maintenance arrangements, the
Company recognizes the related license fees ratably over the terms of the
arrangements beginning when transactions are reported to the Company by its
distribution partners and when all revenue recognition criteria are met.
Specific revenue recognition on distributor partner contracts will be defined by
the terms of the contract as follows:

     - Where SPSS defines the price for renewal of maintenance and support in
       the contract, such amount represents vendor specific objective evidence
       (VSOE) of fair value of maintenance and such amount will be deferred and
       recognized ratably over the life of the support contract.

     - When SPSS provides direct maintenance and support to the end-user, SPSS
       will defer the estimated fair value of the maintenance and support
       consistent with direct sales to its customers.

     - When neither of the above conditions exist and SPSS must provide free
       updates or second tier support to the partner, the revenue from the
       contract will be deferred and recognized ratably over the life of the
       contract.

     - Where no maintenance or support of any kind are required by the contract,
       no revenue will be deferred.

     - When a reseller has a right to return product stock for updated product
       stock (stock swap), SPSS accounts for this as a right of return in
       accordance with Statement of Financial Accounting Standards ("SFAS") No.
       48, Revenue Recognition when Right of Return Exists, and establishes a
       reserve for the estimated amount of the returns.

     Revenues from fixed-price service contracts, where consulting services are
essential to the functionality of the software or Services are provided
separately, are recognized using the percentage-of-completion method, under SOP
81-1, Accounting for Performance of Construction-Type and Certain Production-
Type Contracts, of contract accounting as services are performed to develop,
customize and install the Company's software products. The percentage completed
is measured by the percentage of labor hours incurred to date in relation to
estimated total

                                       44

<PAGE>

labor hours for each contract. Management considers labor hours to be the best
available measure of progress on these contracts.

     We evaluate the criteria outlined in Emerging Issues Task Force (EITF)
Issue No. 99-19, Reporting Revenue Gross as a Principal Versus Net as an Agent,
in determining whether it is appropriate to record the gross amount of sales and
related costs or the net amount earned. Generally, we are primarily obligated in
a transaction, subject to inventory risk, have latitude in establishing prices
and selecting suppliers, or have several but not all of these indicators. As
such, revenue is recorded gross.

     SPSS enters into arrangements which may consist of the sale of: (1)
licenses of the Company's software, (2) professional services and maintenance or
(3) various combinations of each element. Revenues are recognized based on the
residual method under SOP 98-9, a modification of SOP 97-2 "Software Revenue
Recognition", when an agreement has been signed by both parties, delivery of the
product has occurred, the fees are fixed or determinable, collection of the fees
is probable and no other significant obligations remain. Historically, the
Company has not experienced significant returns or offered exchanges of its
products.

     (1) SPSS offers: (a) annual licenses with maintenance renewable annually,
     (b) perpetual licenses with both annual and multi- year maintenance, and
     (c) multi-year licenses with multi-year maintenance. Annual licenses with
     maintenance renewable annually are recognized ratably over the term of the
     maintenance. Vendor-specific objective evidence of fair value of
     maintenance for perpetual licenses with annual maintenance is based on the
     price the customer is required to pay for maintenance when sold separately.
     In certain countries where SPSS operates, vendor-specific objective
     evidence of fair value of maintenance for perpetual licenses with annual
     maintenance is based on a stated renewal rate for maintenance. For these
     types of arrangements, where there are stated renewal rates and they are
     substantive, VSOE exists. If VSOE does not exist, the entire fee is
     deferred and recognized ratably over the term of the arrangement as license
     revenue.

     SPSS licenses software, primarily to end users, on a perpetual basis and on
     an annual and multi-year basis. Under a perpetual license, the customer is
     granted an indefinite right to use the software. SPSS typically has a 60-
     day return policy for these types of licenses and the Company calculates
     its return allowance using a 12-month rolling average based on actual
     returns during the prior 12 months. Under an annual license, the customer
     is granted the right to use the software for one year and may not return or
     cancel during the first year.

     For each type of license, postcontract customer support (maintenance) is
     offered. Under perpetual licenses, it is the customer's option to renew
     maintenance each year. Under an annual or multi-year license, the customer
     must renew the license and maintenance to continue to use the software. In
     both cases, SPSS contacts the customer two months before the scheduled
     renewal date to determine the customer's renewal intentions. If the
     customer indicates that it intends to renew the license, the Company will
     issue a new invoice. In some cases, customers ultimately cancel a license
     even though they initially indicated a willingness to renew. These
     cancellations are tracked in a 12-month rolling average to determine the
     cancellation percentage that SPSS will accrue as its cancellation
     allowance.

     (2) Revenues from professional services are comprised of consulting,
     implementation services and training. Consulting services are generally
     sold on a time-and-materials basis and include services to assist in new
     implementations or configure existing applications to vertical industry and
     customer requirements. SPSS consultants also help organizations to develop
     plans that align analytical efforts with organizational goals, assist with
     the collection and structuring of data for analysis, and facilitate the
     building of predictive analytical models. Services are generally separable
     from the other elements under the arrangement since the performance of the
     services is not essential to the functionality (i.e., the services do not
     involve significant production, modification or customization of the
     software or building complex interfaces) of any other element of the
     transaction. Revenues for professional services and training are recognized
     when the services are performed.

     (3) For multiple element arrangements, each element of the arrangement is
     analyzed and SPSS allocates a portion of the total fee under the
     arrangement to the undelivered elements, such as professional services,
     training and maintenance based on vendor-specific objective evidence of
     fair value. Revenues allocated to the undelivered elements are deferred
     using vendor-specific objective evidence of fair value of the elements and
     the remaining portion of the fee is allocated to the delivered elements
     (generally the software license), under

                                       45

<PAGE>

     the residual method. Vendor-specific objective evidence of fair value is
     based on the price the customer is required to pay when the element is sold
     separately (i.e., hourly time and material rates charged for consulting
     services when sold separately from a software license and the optional
     renewal rates charged by the Company for maintenance arrangements).

     If an element of the license agreement has not been delivered, revenue for
     the element is deferred based on its vendor-specific objective evidence of
     fair value. (If vendor-specific objective evidence of fair value does not
     exist, all revenue is deferred until sufficient objective evidence exists
     or all elements have been delivered). If the fee due from the customer is
     not fixed or determinable, revenue is recognized as payments become due. If
     collectibility is not considered probable, revenue is recognized when the
     fee is collected.

     Amounts allocated to license revenues under the residual method are
     recognized at the time of delivery of the software when vendor-specific
     objective evidence of fair value exists for the undelivered elements, if
     any, and all the other revenue recognition criteria discussed above have
     been met.

  ADVERTISING EXPENSE

     Advertising expenses are charged to operations during the year in which
they are incurred. The total amount of advertising expenses charged to
operations was $2.2 million, $1.6 million and $1.6 million for the years ended
December 31, 2004, 2005 and 2006, respectively.

  EARNINGS PER SHARE

     Earnings per common share (EPS) are computed by dividing net income by the
weighted average number of shares of common stock (basic) plus common stock
equivalents outstanding (diluted) during the period. Common stock equivalents
consist of contingently issuable shares and stock options, which have been
included in the calculation of weighted average shares outstanding using the
treasury stock method. Basic weighted average shares reconciles to diluted
weighted average shares as follows (in thousands):


<Table>
<Caption>
                                                       2004     2005     2006
                                                      ------   ------   ------

<S>                                                   <C>      <C>      <C>

Basic weighted average common shares outstanding....  17,671   18,228   19,451
Dilutive effect of stock options....................     213      652    1,194
                                                      ------   ------   ------
Diluted weighted average common shares outstanding..  17,884   18,880   20,645
                                                      ======   ======   ======
Anti-dilutive shares not included in diluted EPS....   1,128      266       24
                                                      ======   ======   ======

</Table>


  DEPRECIATION AND AMORTIZATION

     Depreciation is recorded using the straight-line method. The estimated
useful lives used in the computation of depreciation of tangible assets are as
follows:


<Table>
<S>                                               <C>

Furniture, fixtures, and office equipment.......  3-8 years
Computer equipment and software.................  3-7 years
Leasehold improvements..........................  3-15 years or lease term if shorter
</Table>


     Capitalized software costs are amortized on a straight-line method over
three to five years based upon the expected life of each product. The straight-
line method is utilized as it results in amortization expense of at least the
amount that would be provided by the ratio of annual product revenue to total
product revenue over the remaining useful life of the products. Identifiable
intangible assets are amortized over their estimated useful lives using the
straight-line method.

  SOFTWARE DEVELOPMENT COSTS

     Software development costs incurred by SPSS in connection with the
Company's long-term development projects are capitalized in accordance with SFAS
No. 86, "Accounting for the Costs of Computer Software to Be Sold, Leased, or
Otherwise Marketed." SPSS has not capitalized software development costs
relating to development projects where the net realizable value is immaterial
and the time between technological

                                       46

<PAGE>

feasibility and release is of short duration. Product enhancement costs are
capitalized when technological feasibility has been established. SPSS reviews
capitalized software development costs each period and, if necessary, reduces
the carrying value of each product to its net realizable value. See additional
discussion at Note 4.

     SPSS applies Statement of Position ("SOP") 98-1, "Accounting for the Costs
of Computer Software Developed or Obtained for Internal Use." This standard
requires that certain costs related to the development or purchase of internal-
use software be capitalized and amortized over the estimated useful life of the
software. SOP 98-1 also requires that costs related to the preliminary project
stage and post-implementation/operations stage of an internal-use computer
software development project be expensed as incurred. See additional discussion
at Note 3.

  EQUITY INCENTIVE PLANS

     The Company maintains one active equity incentive plan that is flexible and
allows various forms of equity incentives to be issued. On January 1, 2006, the
Company adopted the provisions of SFAS No. 123(R) using the modified prospective
method. The Statement requires entities to recognize compensation expense for
awards of equity instruments.

     Prior to the adoption of SFAS No. 123(R), the Company followed the
intrinsic value method in accordance with APB No. 25 to account for its employee
stock options and share-based awards during 2004 and 2005. Accordingly, no
compensation expense was recognized in those years for share-based awards
granted in connection with the issuance of stock options under the Company's
equity incentive plans; however, compensation expense was recognized in
connection with the issuance of restricted share units and stock options granted
to non-employees under the Company's equity incentive plans. The adoption of
SFAS No. 123(R) primarily resulted in a change in the Company's method of
recognizing the fair value of share-based compensation and estimating
forfeitures for all unvested awards. Specifically, the adoption of SFAS No.
123(R) resulted in the Company recording compensation expense for employee stock
options and employee share-based awards granted prior to the adoption using the
Black-Scholes pricing valuation model. See additional discussion at Note 15.

  CASH AND CASH EQUIVALENTS

     Cash and cash equivalents are comprised of highly liquid investments with
original maturity dates of three months or less. As of December 31, 2006, the
Company had $57.0 million invested in an overnight investment in the form of
commercial paper.

  CONCENTRATION OF CREDIT RISK

     The Company places temporary cash investments with institutions of high
credit quality. The Company has a broad customer base doing business in all
regions of the United States as well as other areas of North America, Europe and
the Pacific Rim. At December 31, 2005 and 2006, the Company had approximately
$84.4 million and $140.2 million, respectively, on deposit with financial
institutions. Of those amounts, approximately $53.4 million and $77.0 million of
cash was held outside of the United States at December 31, 2005 and 2006,
respectively. Of the cash held on deposit, essentially all of the cash balance
was in excess of amounts insured by the Federal Deposit Insurance Corporation or
other foreign provided bank insurance. The Company performs periodic evaluations
of these institutions for relative credit standing and has not experienced any
losses as a result of this concentration. Consequently, no significant
concentration of credit risk is considered to exist.

  ACCOUNTS RECEIVABLE

     The Company's accounts receivable are primarily due from entities in the
government, academic and commercial sectors. The Company performs ongoing credit
evaluations of its customers and adjusts credit limits based upon payment
history and the customer's credit worthiness, as determined by the Company's
review of their current credit information. The Company continuously monitors
past due status, delinquency status, collections and payments from its customers
and maintains a provision for estimated credit losses based upon historical
experience and any specific customer collection issues that it has identified.


                                       47

<PAGE>

  INVENTORIES

     Inventories, consisting of finished goods, are stated at the lower of cost
or market. Cost is determined using the first-in, first-out method.

  PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS

     Property, equipment and leasehold improvements are stated at cost. See
additional discussion at Note 3.

  GOODWILL AND OTHER INTANGIBLE ASSETS

     The Company reviews its goodwill and intangible assets with indefinite
useful lives for impairment at least annually in accordance with the provisions
of SFAS No. 142, Goodwill and Other Intangible Assets. Identifiable intangible
assets are amortized over a seven to ten year period using the straight-line
method. SFAS No. 142 requires the Company to perform the goodwill impairment
test annually or when a change in facts and circumstances indicate that the fair
value of an asset may be below its carrying amount. The Company performed an
impairment test in the fourth quarter of 2005 and 2006 and no impairment was
required to be recognized upon completion of these tests.

  LONG-LIVED ASSETS

     Long-lived assets to be held and used are reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount should be
evaluated. Factors leading to impairment include a combination of significant
underperformance relative to expected historical or projected future operating
results, significant changes in the manner of use of the acquired assets or the
strategy for the Company's overall business and significant negative industry or
economic trends. The assessment of recoverability is based on management's
estimate. Impairment is measured by comparing the carrying value to the
estimated and undiscounted future cash flows expected to result from the use of
the assets and their eventual disposition.

  RECLASSIFICATIONS

     Where appropriate, some items relating to the prior years have been
reclassified to conform to the presentation in the current year.

  INCOME TAXES

     SPSS applies the asset and liability method of accounting for income taxes
in which deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases and operating loss and tax credit carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date.

  FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES

     Financial Accounting Standards Board Statement No. 133, "Accounting for
Derivative Instruments and Hedging Activities" ("SFAS No. 133"), as amended by
Financial Accounting Standards Board Statement No. 138, "Accounting for Certain
Derivative Instruments and Certain Hedging Activities" ("SFAS No. 138"), and by
Financial Accounting Standards No. 149, "Amendment of Statement 133 on
Derivative Instruments and Hedging Activities," ("SFAS No. 149") requires
companies to recognize all of their derivative instruments as either assets or
liabilities at fair value in the statement of financial position. The accounting
for changes in the fair value (i.e., gains or losses) of a derivative instrument
depends on whether it has been designated and qualifies as part of a hedging
relationship and further, on the type of hedging relationship. For those
derivative instruments that are designated and qualify as hedging instruments, a
company must designate the hedging instrument, based upon the exposure being
hedged, as either a fair value hedge or a cash flow hedge.


                                       48

<PAGE>

     The Company accounts for derivative financial instruments in accordance
with SFAS No. 133 and related amendments. The Company recognizes all derivative
financial instruments, such as foreign exchange contracts, in the consolidated
financial statements at fair value. Changes in fair values of derivatives
accounted for as fair value hedges are recorded as a component of "Other
income/expense" in the Consolidated Statements of Income along with the portions
of the changes in the fair value of the hedged items that relate to the hedged
risk(s).

  DEBT EXPENSE

     Expenses incurred in securing and issuing debt are amortized over the life
of the remaining debt and included as a component of interest expense.

  RECENT ACCOUNTING PRONOUNCEMENTS

     In June 2006, the FASB issued Interpretation No. 48 (FIN 48), "Accounting
for Uncertainty in Income Taxes -- an Interpretation of SFAS No. 109." FIN 48
clarifies the accounting for uncertainty in income taxes recognized in an
enterprise's financial statements in accordance with SFAS No. 109, "Accounting
for Income Taxes." FIN 48 prescribes a recognition threshold and measurement of
a tax position taken or expected to be taken in an enterprise's tax return. In
addition, FIN 48 provides guidance on derecognition, classification, interest,
penalties, accounting in interim periods and disclosure related to uncertain
income tax positions. FIN 48 is effective for fiscal years beginning after
December 15, 2006. The Company will adopt FIN 48 as of January 1, 2007, as
required. The Company is currently evaluating the impact that the adoption of
FIN 48 will have, if any, on its consolidated financial statements and notes
thereto. However, the Company does not expect the adoption of FIN 48 to have a
material effect on its financial position or operating results.

     In June 2006, the FASB ratified a consensus opinion reached by the Emerging
Issues Task Force (EITF) on EITF Issue 06-3, "How Taxes Collected from Customers
and Remitted to Governmental Authorities Should Be Presented in the Income
Statement (That Is, Gross versus Net Presentation)." The guidance in EITF Issue
06-3 requires disclosure in interim and annual financial statements of the
amount of taxes on a gross basis, if significant, that are assessed by a
governmental authority that are imposed on and concurrent with a specific
revenue producing transaction between a seller and customer such as sales, use,
value added, and some excise taxes. Additionally, the income statement
presentation (gross or net) of such taxes is an accounting policy decision that
must be disclosed. The consensus in EITF Issue 06-3 is effective for interim and
annual reporting periods beginning after December 15, 2006. The Company intends
to adopt EITF Issue 06-3 effective January 1, 2007, and does not believe that
the adoption will have a material effect on its consolidated financial
statements.

     In September 2006, the SEC issued Staff Accounting Bulleting (SAB) No. 108,
"Considering the Effects of Prior Year Misstatements when Quantifying
Misstatements in Current Year Financial Statements." SAB No. 108 provides
interpretive guidance on how the effects of prior-year uncorrected misstatements
should be considered when quantifying misstatements in the current year
financial statements. SAB No. 108 requires registrants to quantify misstatements
using both an income statement and balance sheet approach and evaluate whether
either approach results in a misstatement that, when all relevant quantitative
and qualitative factors are considered, is material. If prior year errors that
have been previously considered immaterial now are considered material based on
either approach, no restatement is required so long as management properly
applied its previous approach and all relevant facts and circumstances were
considered. If prior years are not restated, the cumulative effect adjustment is
recorded in opening accumulated earnings as of the beginning of the fiscal year
of adoption. The Company has reviewed, and implemented, the provisions of SAB
No. 108 as of December 31, 2006, and has determined that it did not have a
material impact on its financial statements.


                                       49

<PAGE>

(2) DOMESTIC AND FOREIGN OPERATIONS

     Certain balance sheet information, net revenues and net income of
international subsidiaries as of and for the years ended December 31, 2004, 2005
and 2006 included in the consolidated financial statements are summarized as
follows (in thousands):


<Table>
<Caption>
                                                          DECEMBER 31,
                                                 ------------------------------
                                                   2004       2005       2006
                                                 --------   --------   --------

<S>                                              <C>        <C>        <C>

Working capital................................  $  7,175   $ 31,256   $ 54,315
                                                 ========   ========   ========
Excess of noncurrent assets over noncurrent
  liabilities..................................  $ 16,995   $ 16,007   $ 22,796
                                                 ========   ========   ========
Net revenues...................................  $122,409   $133,288   $151,780
                                                 ========   ========   ========
Net income.....................................  $ 13,200   $ 23,077   $ 14,375
                                                 ========   ========   ========

</Table>


     Net revenues per geographic region, attributed to countries based upon
point of sale, are summarized as follows (in thousands):


<Table>
<Caption>
                                                     YEAR ENDED DECEMBER 31,
                                                 ------------------------------
                                                   2004       2005       2006
                                                 --------   --------   --------

<S>                                              <C>        <C>        <C>

United States..................................  $101,665   $102,775   $109,752
                                                 --------   --------   --------
United Kingdom.................................    31,701     31,911     34,047
The Netherlands................................    21,943     27,411     32,092
Other..........................................    37,297     39,321     45,398
                                                 --------   --------   --------
  Total Europe.................................    90,941     98,643    111,537
                                                 --------   --------   --------
Japan..........................................    21,032     22,416     25,446
Other..........................................    10,436     12,229     14,797
                                                 --------   --------   --------
  Total Pacific Rim............................    31,468     34,645     40,243
                                                 --------   --------   --------
Total International............................   122,409    133,288    151,780
                                                 --------   --------   --------
     Total.....................................  $224,074   $236,063   $261,532
                                                 ========   ========   ========

</Table>


     Long-lived assets, excluding long-term deferred tax assets, per geographic
region are summarized as follows (in thousands):


<Table>
<Caption>
                                                             DECEMBER 31,
                                                          -----------------
                                                            2005      2006
                                                          -------   -------

<S>                                                       <C>       <C>

United States...........................................  $78,783   $77,619
                                                          -------   -------
United Kingdom..........................................    5,083     6,519
The Netherlands.........................................    8,570     8,141
Other...................................................      836     2,247
                                                          -------   -------
  Total Europe..........................................   14,489    16,907
                                                          -------   -------
Japan...................................................    1,806     1,736
Other...................................................      182       988
                                                          -------   -------
  Total Pacific Rim.....................................    1,988     2,724
                                                          -------   -------
Total International.....................................   16,477    19,631
                                                          -------   -------
       Total............................................  $95,260   $97,250
                                                          =======   =======

</Table>




                                       50

<PAGE>

(3) PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS

     Property, equipment and leasehold improvements consist of the following (in
thousands):


<Table>
<Caption>
                                                             DECEMBER 31,
                                                         -------------------
                                                           2005       2006
                                                         --------   --------

<S>                                                      <C>        <C>

Property, equipment and leasehold improvements, at
  cost:
Furniture, fixtures, and office equipment..............  $ 15,332   $ 15,707
Computer equipment and software........................    68,840     70,355
Leasehold improvements.................................    14,936     16,518
                                                         --------   --------
Balance, cost -- end of year...........................    99,108    102,580
Less accumulated depreciation and amortization.........   (78,667)   (84,872)
                                                         --------   --------
Balance, net -- end of year............................  $ 20,441   $ 17,708
                                                         ========   ========

</Table>


     Activity in property, equipment and leasehold improvements is summarized as
follows (in thousands):


<Table>
<Caption>
                                                             DECEMBER 31,
                                                          -----------------
                                                            2005      2006
                                                          -------   -------

<S>                                                       <C>       <C>

Balance, net -- beginning of year.......................  $21,480   $20,441
Additions...............................................    7,543     4,287
Asset write-offs........................................       --    (1,283)
Depreciation expense....................................   (8,040)   (6,318)
Foreign currency translation and other..................     (542)      581
                                                          -------   -------
Balance, net -- end of year.............................  $20,441   $17,708
                                                          =======   =======

</Table>


     During 2004, 2005 and 2006, SPSS recorded depreciation expense of $8.4
million, $8.0 million and $6.3 million, respectively, as a component of
operating expenses.

     During 2004, 2005 and 2006, SPSS capitalized $0.8 million, $0.4 million and
$0.1 million, respectively, and amortized $1.4 million, $1.2 million and $1.0
million, respectively, of internal-use computer software.

     During 2004, the Company determined that approximately $1.5 million of
computer equipment and software no longer had continuing value, and was written
off in the consolidated financial statements. Additionally, in 2004, the Company
sold property that previously held the SPSS Limited Quantime offices in London,
England. The property was sold for total proceeds of $2.6 million and the
Company recognized a gain on the sale of $0.8 million.

     During 2005, the Company identified approximately $0.3 million of
furniture, fixtures and office equipment, $2.1 million of computer equipment and
software, and $0.5 million of leasehold improvements that were no longer in use,
and had been fully depreciated. Accordingly, these amounts were removed from the
property, equipment and leasehold improvements cost balances during 2005 with an
offsetting charge to accumulated depreciation and amortization.

     During 2006, the Company wrote off approximately $1.3 million of certain
software to a fair value of zero after the Company determined that the future
use of this software was no longer likely.


                                       51

<PAGE>

(4) SOFTWARE DEVELOPMENT COSTS AND PURCHASED SOFTWARE

     The components of net capitalized software are summarized as follows (in
thousands):


<Table>
<Caption>
                                                             DECEMBER 31,
                                                         -------------------
                                                           2005       2006
                                                         --------   --------

<S>                                                      <C>        <C>

Product translations...................................  $  9,898   $ 11,041
Acquired software technology...........................    11,967     14,800
Capitalized software development costs.................    37,214     40,209
                                                         --------   --------
Balance, cost -- end of year...........................    59,079     66,050
Accumulated amortization...............................   (30,557)   (34,467)
                                                         --------   --------
Balance, net -- end of year............................  $ 28,522   $ 31,583
                                                         ========   ========

</Table>


     Activity in capitalized software is summarized as follows (in thousands):


<Table>
<Caption>
                                                             DECEMBER 31,
                                                          -----------------
                                                            2005      2006
                                                          -------   -------

<S>                                                       <C>       <C>

Balance, net -- beginning of year.......................  $28,178   $28,522
Additions...............................................    9,021    12,761
Amortization expense charged to cost of license and
  maintenance revenues..................................   (8,677)   (9,899)
Foreign currency translation............................       --       199
                                                          -------   -------
Balance, net -- end of year.............................  $28,522   $31,583
                                                          =======   =======

</Table>


     During 2004, 2005 and 2006, SPSS recorded amortization expense of $7.8
million, $8.7 million and $9.9 million, respectively, charged to cost of license
and maintenance revenues.

     Total software development expenditures, including amounts expensed as
incurred, amounted to approximately $57.0 million, $54.4 million and $64.4
million for the years ended December 31, 2004, 2005 and 2006, respectively.

     During 2005, the Company identified approximately $3.3 million of acquired
software technology and $10.0 million of capitalized software development costs
that were fully amortized on versions of the Company's software products no
longer in use. During 2006, the Company identified approximately $6.0 million of
capitalized software development costs that were fully amortized versions of the
Company's software products no longer in use. Accordingly, these amounts were
removed from the capitalized software balances during 2005 and 2006 with an
offsetting charge to accumulated amortization.

     The following table presents the estimated future amortization expense for
acquired software technology (in thousands):


<Table>
<S>                                                               <C>

For the year ended December 31, 2007............................  $1,829
For the year ended December 31, 2008............................   1,647
For the year ended December 31, 2009............................     728
For the year ended December 31, 2010............................     457
For the year ended December 31, 2011............................     421
</Table>




                                       52

<PAGE>

(5) GOODWILL AND INTANGIBLE ASSETS

     Goodwill and intangible asset data are as follows (in thousands):


<Table>
<Caption>
                                                            DECEMBER 31,
                                         -------------------------------------------------
                                                   2005                      2006
                                         -----------------------   -----------------------
                                           GROSS                     GROSS
                                         CARRYING    ACCUMULATED   CARRYING    ACCUMULATED
                                          AMOUNT    AMORTIZATION    AMOUNT    AMORTIZATION
                                         --------   ------------   --------   ------------

<S>                                      <C>        <C>            <C>        <C>

Amortizable intangible assets:
  Other intangible assets -- Customer
     relationships.....................   $ 2,102       $(422)      $ 2,264       $(701)
  Other intangible
     assets -- Trademarks..............       400        (280)          400        (320)
Unamortizable intangible assets:
  Other intangible assets..............     1,827                     1,827
Goodwill...............................    41,207                    41,923
Aggregate amortization expense:
  2006.................................                                 319
Estimated amortization expense:
  2007.................................                                 315
  2008.................................                                 315
  2009.................................                                 275
  2010.................................                                 275
  2011.................................                                  78
</Table>


     The aggregate amortization expense for the years ended December 31, 2004,
2005 and 2006 was $0.2 million, $0.2 million and $0.3 million, respectively.

     The following tables present the changes in the carrying amount of goodwill
and other intangibles as of December 31, 2005 and December 31, 2006 (in
thousands):


<Table>
<Caption>
                                                             DECEMBER 31, 2005
                                                          ----------------------
                                                          GOODWILL   INTANGIBLES
                                                          --------   -----------

<S>                                                       <C>        <C>

Balance at beginning of year............................   $42,197      $3,278
Amortization expense....................................        --        (231)
Intangibles acquired....................................        --         780
Foreign currency translation............................      (990)       (200)
                                                           -------      ------
Balance at end of year..................................   $41,207      $3,627
                                                           =======      ======

</Table>




<Table>
<Caption>
                                                             DECEMBER 31, 2006
                                                          ----------------------
                                                          GOODWILL   INTANGIBLES
                                                          --------   -----------

<S>                                                       <C>        <C>

Balance at beginning of year............................   $41,207      $3,627
Amortization expense....................................        --        (319)
Foreign currency translation............................       716         162
                                                           -------      ------
Balance at end of year..................................   $41,923      $3,470
                                                           =======      ======

</Table>


     During 2005, the Company reached a final agreement to terminate the
agreement with its Belgium distributor in efforts to further improve the
operating performance in Belgium. The agreement was reached for the Company to
purchase the existing Belgium customer base. The result of this transaction was
a $0.8 million addition to intangible assets, with a useful life of ten years.


                                       53

<PAGE>

(6) INTANGIBLE ASSETS

     Intangible assets consist of the following at December 31 (in thousands):


<Table>
<Caption>
                                                    2005      2006    USEFUL LIVES
                                                   ------   -------   ------------

<S>                                                <C>      <C>       <C>

Trademarks.......................................  $  400   $   400      10 years
Customer relationships...........................   2,102     2,264    7-10 years
                                                   ------   -------
                                                    2,502     2,664
Less accumulated amortization....................    (702)   (1,021)
                                                   ------   -------
                                                    1,800     1,643
Unamortizable trademarks.........................   1,827     1,827    Indefinite
                                                   ------   -------
Total intangible assets, net.....................  $3,627   $ 3,470
                                                   ======   =======

</Table>


(7) ACQUISITIONS AND DIVESTITURES

  ACQUISITIONS

  Data Distilleries B.V.

     On November 4, 2003, SPSS, through SPSS International B.V., its wholly
owned subsidiary, acquired Data Distilleries B.V., a Netherlands-based developer
of analytic applications. The terms and conditions of the acquisition are
specified in a Stock Purchase Agreement, by and among SPSS, SPSS International
B.V. and the owners of all of the issued and outstanding shares of the capital
stock of Data Distilleries. The aggregate purchase price for all of the issued
and outstanding capital stock of Data Distilleries consists of guaranteed and
contingent payments. The guaranteed portion of the purchase price was paid at
closing and consisted of a payment of $1.0 million in cash and 282 thousand
shares of SPSS common stock valued at $5.3 million for purposes of this
transaction. The contingent portion of the purchase price was required to be
paid, if at all, at the end of the first and second years following the closing.
The Company's obligation to make the contingent payments depended on the
achievement of certain growth targets for license and maintenance revenues from
the Data Distilleries applications. SPSS was not required to make any contingent
payments to the former owners of Data Distilleries during 2004 or 2005 because
these growth targets were not met in 2004 or 2005.

     In connection with the Data Distilleries transaction, SPSS incurred an
estimated $1.8 million in transaction fees, including legal, valuation and
accounting fees. The purchase price of $6.3 million has been allocated to the
tangible and identifiable intangible assets acquired and liabilities assumed on
the basis of their estimated fair values on the acquisition date. The results of
operations of Data Distilleries are included in the Consolidated Statements of
Operations from the date of the acquisition.

     The shares issued in the acquisition of Data Distilleries have been valued
in accordance with EITF Issue No. 99-12, "Determination of the Measurement Date
for the Market Price of Acquirer Securities Issued in a Purchase Business
Combination." In accordance with EITF No. 99-12, the Company has established
that the first date on which the number of our shares and the amount of other
consideration became fixed was November 4, 2003. Accordingly, the Company valued
the shares issued in the transaction at $18.84 per share utilizing the average
closing price for a few days before and after November 4, 2003.

     Under the terms of the November 4, 2003 Stock Purchase Agreement with Data
Distilleries, the Company was obligated to file a Registration Statement on Form
S-3 to register the potential resale of the 282 thousand shares issued to Data
Distilleries shareholders in the transaction. This contingent obligation
required the Company to classify the common stock as temporary equity labeled
"Common Stock Subject to Repurchase" at December 31, 2003. Because the Company's
Annual Report on Form 10-K for fiscal year 2003 was not timely filed, SPSS
became ineligible to use Form S-3 and was not able to register the shares by the
required April 2004 filing date. The Company fulfilled its obligation under the
Stock Purchase Agreement by repurchasing from each former Data Distilleries
shareholder the number of shares of SPSS common stock received by such
shareholder in connection with this transaction. During April 2004, SPSS
notified the former shareholders of the Company's inability to

                                       54

<PAGE>

properly register these shares and through June 30, 2004, the Company
repurchased all 282 thousand shares at a cost of $5.4 million.

  DIVESTITURES

     On December 29, 2003, the Company received its first payment in a
transaction with Systat Software, Inc., a subsidiary of Cranes Software
International Ltd. ("Systat"), pursuant to which Systat acquired from SPSS an
exclusive worldwide license to distribute the Sigma-series line of products for
a three-year period and purchased certain related assets. Pursuant to the
agreement, Systat assumed all responsibilities for the marketing and sales of
the products as well as their ongoing development and technical support. SPSS
also transferred to Systat all rights and obligations with respect to customers
and personnel and all fixed assets related to the Sigma-series products (the
"Related Assets"). In exchange for the exclusive worldwide license and Related
Assets, Systat was obligated to make cash payments to SPSS in the aggregate
amount of $13.0 million. The agreement between SPSS and Systat also granted
Systat an option to purchase the licensed property.

     The $9.0 million payment made by Systat to SPSS on December 29, 2003
included the initial $6.0 million license fee and $3.0 million in consideration
of the Related Assets. Systat was obligated to make, and remitted, additional
license payments in the aggregate amount of $3.0 million in 2004. A final
license payment of $1.0 million was made in 2005.

     The distribution license and sale of the Related Assets of the Sigma-series
product line was accounted for as a divestiture of a business. The sale resulted
in a gain of $8.6 million during 2003. In addition to the net book value of the
assets sold, goodwill was reduced by $1.0 million to reflect the estimated
goodwill allocated to this business. During 2004, SPSS recorded a $0.1 million
adjustment to reduce certain professional fee accruals associated with this
transaction. During 2005, SPSS recorded an additional gain of $1.0 million
related to the final license payment made, as noted above. Systat made a final
payment of $1.0 million to SPSS in 2006 to exercise its option to purchase the
licensed property. This $1.0 million payment was recorded as other income.

(8) COMMITMENTS AND CONTINGENCIES

  OPERATING LEASES

     SPSS leases its office facilities, storage space, and some data processing
equipment under lease agreements expiring through the year 2012. Minimum lease
payments indicated below do not include costs such as property taxes,
maintenance, and insurance.

     The following is a schedule of future noncancellable minimum lease payments
required under operating leases as of December 31, 2006 (in thousands):


<Table>
<Caption>
YEAR ENDING DECEMBER 31,                                          AMOUNT
------------------------                                         -------

<S>                                                              <C>

2007...........................................................  $ 9,699
2008...........................................................    8,337
2009...........................................................    7,401
2010...........................................................    6,897
2011...........................................................    6,304
Thereafter.....................................................    5,785
                                                                 -------
Total operating lease obligation...............................  $44,423
                                                                 =======

</Table>


     There are certain renewal options with respect to the operating leases. If
the Company does not exercise any such options, the leased space will be
returned to the lessors at the end of the lease term. In accordance with SFAS
No. 13, when cash payments are not made on a straight-line basis, the Company
recognizes rent expense on a straight-line basis over the lease term. Rent
expense related to operating leases was approximately $14.4 million, $12.6
million and $12.2 million during the years ended December 31, 2004, 2005 and
2006, respectively.


                                       55

<PAGE>

  HYPERION SOLUTIONS

     In January 2007, SPSS renewed its contract with Hyperion Solutions. This
renewal extended the term of the Company's contract with Hyperion until 2012.
Under the revised agreement, SPSS has the non-exclusive right to license, market
and distribute the releases of Hyperion's Essbase and Analyzer software. Such
right will not extend to Release 9 and beyond of Hyperion's software. SPSS will,
however, continue to port future releases of the software to the i-Series
computer platform and provide customer support for that software in exchange for
a portion of the support fees charged to end-users.

  BANTA GLOBAL TURNKEY

     Banta Global Turnkey manufactures, packages and distributes a majority of
the Company's software products in the United States and multiple international
locations. Banta has provided these services to SPSS since 1997, and SPSS and
Banta amended and renewed their distribution agreement in January 2006. The
agreement with Banta has a three-year term and automatically renews thereafter
for successive one-year periods. Either party may terminate the agreement for
cause if the other party materially breaches its obligations.

  LITIGATION

     On January 22, 2007, a putative derivative action captioned Fortney v.
Noonan, et. al., was filed in the United States District Court for the Northern
District of Illinois, Eastern Division. The action purports to assert claims on
behalf of the Company against several current and former executive officers and
members of the Board of Directors alleging improper backdating of stock option
grants to maximize certain defendants' profits, failing to properly account for
and take tax deductions for those grants, insider trading and issuing false
financial statements. The current executive officers and directors who are named
in the complaint are Jack Noonan, William Binch, Michael Blair, Kenneth Holec,
Merritt Lutz and Norman Nie. The Company is named as a nominal defendant. The
complaint alleges various causes of action under federal and Delaware law,
including claims for unjust enrichment, breach of fiduciary duty and rescission,
as well as claims under Sections 14(a) and 20(a) of the Securities Exchange Act
of 1934. Plaintiffs seek damages, disgorgement and restitution. As previously
disclosed by the Company in July 2006, the Company has completed a detailed
review of its accounting for stock option grants. As a result of the review, the
Company reclassified approximately $3.3 million of retained earnings to
additional paid-in capital and has determined that no further accounting
adjustments are required. The Company's response to the complaint is not yet
due.

     SPSS Inc. has been named as a defendant in a lawsuit filed on December 6,
2002 in the United States District Court for the Southern District of New York,
under the caption Basu v. SPSS Inc., et al., Case No. 02CV9694. The complaint
alleges that, in connection with the issuance and initial public offering of
shares of common stock of NetGenesis Corp., the registration statement and
prospectus filed with the Securities and Exchange Commission in connection with
the IPO contained material misrepresentations and/or omissions. The alleged
violations of the federal securities laws took place prior to December 31, 2001,
the effective date of the merger in which the Company's acquisition subsidiary
merged with and into NetGenesis Corp. NetGenesis Corp. is now a wholly owned
subsidiary of SPSS. Other defendants to this action include the former officers
and directors of NetGenesis Corp. and the investment banking firms that acted as
underwriters in connection with the IPO. The plaintiff is seeking unspecified
compensatory damages, prejudgment and post-judgment interest, reasonable
attorney fees, experts' witness fees and other costs and any other relief deemed
proper by the Court. The Company is aggressively defending itself, and plans to
continue to aggressively defend itself against the claims set forth in the
complaint. The Company and the named officers and directors filed an answer to
the complaint on July 14, 2003. At this time, the Company believes the lawsuit
will be settled with no material adverse effect on its results of operations,
financial condition, or cash flows.


                                       56

<PAGE>

(9) OTHER ACCRUED LIABILITIES

     Other accrued liabilities consist of the following at December 31 (in
thousands):


<Table>
<Caption>
                                                            2005      2006
                                                          -------   -------

<S>                                                       <C>       <C>

Payroll.................................................  $ 8,576   $10,598
Rent....................................................    3,831     3,059
Customer advances.......................................    2,084     2,282
Royalties...............................................    1,711     1,966
Other accrued expenses..................................    4,900     6,298
                                                          -------   -------
Total other accrued liabilities.........................  $21,102   $24,203
                                                          =======   =======

</Table>


(10) FINANCING ARRANGEMENTS AND HEDGING ACTIVITIES

     On March 31, 2003, SPSS entered into a four (4) year, $25.0 million credit
facility with Wells Fargo Foothill, Inc. (f/k/a Foothill Capital Corporation).
The Wells Fargo Foothill facility includes a four (4) year term loan in the
amount of $10.0 million, two revolving lines of credit and a letters of credit
facility not to exceed $3.0 million. The maximum amount SPSS may borrow under
Revolver A will depend upon the value of the Company's eligible accounts
receivable generated within the United States. Revolver B provides for a credit
facility of up to $3.5 million provided that no event of default exists. As of
December 31, 2006, the Company had availability of $6.4 million under the
revolving lines of credit.

     The terms and conditions of the Wells Fargo Foothill credit facility are
specified in a Loan and Security Agreement, dated as of March 31, 2003, by and
between Wells Fargo Foothill and SPSS. The term loan portion of the facility
bears interest at a rate of 2.5% above prime, with potential future interest
rate reductions of up to 0.5% in the interest rate based upon the Company's
achievement of specified EBITDA targets. One component of the revolving line of
credit will bear interest at a rate of prime plus 3.0%. On the remainder of the
revolving line of credit, SPSS may select interest rates of either prime plus
0.25% or LIBOR plus 2.5% with respect to each advance made by Foothill. The
credit fee rate for letters of credit is 2.0% per annum times the daily balance
of the undrawn amount of all outstanding letters of credit. In May 2003, the
Company began paying down the term loan of $10.0 million in equal annual
installments over the scheduled four (4) year repayment period. During the first
quarter of 2006, the Company paid off the remaining balance of its long term
loan in the amount of $3.4 million.

     The Wells Fargo Foothill facility requires SPSS to meet certain financial
covenants including minimum EBITDA targets and includes additional requirements
concerning, among other things, the Company's ability to incur additional
indebtedness, create liens on assets, make investments, engage in mergers,
acquisitions or consolidations where SPSS is not the surviving entity, sell
assets, engage in certain transactions with affiliates, and amend its
organizational documents or make changes in capital structure.

     The Wells Fargo Foothill facility is secured by all of the Company's assets
located in the United States. ShowCase Corporation, a Minnesota corporation and
wholly owned subsidiary of SPSS, and NetGenesis Corp., a Delaware corporation
and wholly owned subsidiary of SPSS, have guaranteed the obligations of SPSS
under the Loan and Security Agreement. This guaranty is secured by all of the
assets of ShowCase and NetGenesis.

     The Company's credit facility with Wells Fargo Foothill expires on March
31, 2007. The Company may seek to obtain a replacement line of credit.

     The Company accounts for derivative financial instruments in accordance
with SFAS No. 133 and related amendments. The Company recognizes all derivative
financial instruments, such as foreign exchange contracts, in the consolidated
financial statements at fair value. Changes in fair values of derivatives
accounted for as fair value hedges are recorded in income along with the
portions of the changes in the fair value of the hedged items that relate to the
hedged risk(s).

     During the third quarter of 2006, the Company entered into forward
contracts for the purpose of hedging future foreign currency exposure on
intercompany balances between certain of its subsidiaries. The change in the
fair value of the contracts, since they were entered into, was recorded as a
component of "Other current assets" in the

                                       57

<PAGE>

Consolidated Balance Sheets. The fair value was based upon foreign exchange spot
rates at the end of the period. Any changes in the fair value of the instrument
were recorded as a component of "Other income/expense" in the Consolidated
Statements of Income. As of December 31, 2006, the change in fair value was $0.8
million. The notional amount of these contracts was $10.8 million, and the
principal currency hedged is the Japanese Yen relative to the British Pound with
a notional weighted average exchange rate between the currencies of 212.12.
These contracts call for the purchase of local currencies at a specified future
date to settle certain intercompany balances between the Company's U.K. and
Japan-based subsidiaries. The settlement date for these contracts is June 18,
2007. The Company does not use derivative instruments for speculative or trading
purposes.

(11) OTHER INCOME

     Other income consists of the following (in thousands):


<Table>
<Caption>
                                                       YEAR ENDED DECEMBER 31,
                                                     --------------------------
                                                      2004      2005      2006
                                                     ------   -------   -------

<S>                                                  <C>      <C>       <C>

Interest and investment income.....................  $  485   $   990   $ 3,359
Interest expense...................................    (767)     (829)     (220)
                                                     ------   -------   -------
Net interest and investment income (expense).......    (282)      161     3,139
                                                     ------   -------   -------
Gain on divestiture of Sigma-series product line...      82     1,000     1,000
Exchange gain (loss) on foreign currency
  transactions.....................................     896    (2,013)   (3,981)
International research and development credit......     976        --        --
Write-down in e-Intelligence investment............    (217)       --        --
Other..............................................      25        --        --
                                                     ------   -------   -------
Other, net.........................................   1,680    (2,013)   (3,981)
                                                     ------   -------   -------
Total other income (expense).......................  $1,480   $  (852)  $   158
                                                     ======   =======   =======

</Table>


     In 2003, the Company recognized a gain of $8.6 million on the divestiture
of the Sigma-Series product line. During 2004, SPSS recorded a $0.1 million
adjustment to reduce certain professional fee accruals associated with this
transaction. During 2005, the Company recognized income of $1.0 million related
to the final license payment from Systat related to the divestiture of the
Sigma-series product line. Systat made a final payment of $1.0 million to SPSS
in 2006 to exercise its option to purchase the licensed property. See additional
discussion in Note 7.

(12) INCOME TAXES

     Income before income taxes consists of the following (in thousands):


<Table>
<Caption>
                                                      YEAR ENDED DECEMBER 31,
                                                   ----------------------------
                                                     2004       2005      2006
                                                   --------   -------   -------

<S>                                                <C>        <C>       <C>

Domestic.........................................  $(11,764)  $(2,120)  $13,545
Foreign..........................................    19,820    29,292    20,916
                                                   --------   -------   -------
Pretax income....................................  $  8,056   $27,172   $34,461
                                                   ========   =======   =======

</Table>




                                       58

<PAGE>

     Income tax expense (benefit) consists of the following (in thousands):


<Table>
<Caption>
                                                   CURRENT   DEFERRED    TOTAL
                                                   -------   --------   -------

<S>                                                <C>       <C>        <C>

Year ended December 31, 2004
  U.S. Federal...................................  $    96    $(3,231)  $(3,135)
  State..........................................       --       (972)     (972)
  Foreign........................................    5,755        865     6,620
                                                   -------    -------   -------
  Income tax expense (benefit)...................  $ 5,851    $(3,338)  $ 2,513
                                                   =======    =======   =======
Year ended December 31, 2005
  U.S. Federal...................................  $ 3,559    $ 1,980   $ 5,539
  State..........................................       77       (751)     (674)
  Foreign........................................    8,194     (1,979)    6,215
                                                   -------    -------   -------
  Income tax expense (benefit)...................  $11,830    $  (750)  $11,080
                                                   =======    =======   =======
Year ended December 31, 2006
  U.S. Federal...................................  $ 2,753    $10,128   $12,881
  State..........................................      451       (552)     (101)
  Foreign........................................    7,530       (989)    6,541
                                                   -------    -------   -------
  Income tax expense (benefit)...................  $10,734    $ 8,587   $19,321
                                                   =======    =======   =======

</Table>


     For the years ended December 31, 2004, 2005 and 2006, the reconciliation of
the statutory Federal income tax rate to the Company's effective tax rate is as
follows (in thousands):


<Table>
<Caption>
                                                      YEAR ENDED DECEMBER 31,
                                                   ----------------------------
                                                     2004      2005       2006
                                                   -------   --------   -------

<S>                                                <C>       <C>        <C>

Statutory Federal income tax rate................       34%        35%       35%
                                                   -------   --------   -------
Income taxes using the Federal statutory rate....  $ 2,739   $  9,510   $12,061
State income taxes, net of Federal tax benefit...     (641)      (438)      295
Foreign taxes at net rates different from U.S.
  Federal rates..................................     (855)    (3,074)     (591)
Foreign tax credit...............................     (204)   (17,007)    1,281
Research and development credit..................       --         --      (400)
Net operating loss...............................       --     13,664        --
Deemed income from foreign operations............      265      6,989     2,178
Dividends from foreign affiliates................       --         --     2,987
Nondeductible costs for income tax purposes......      271       (143)      226
Extra territorial income and domestic
  manufacturing deduction........................     (544)      (160)     (263)
Prior year tax refunds...........................       --       (963)       --
Change in valuation allowance....................    2,590      3,677     1,966
Other, net.......................................   (1,108)      (975)     (419)
                                                   -------   --------   -------
Income tax expense...............................  $ 2,513   $ 11,080   $19,321
                                                   =======   ========   =======

</Table>




                                       59

<PAGE>

     The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets/(liabilities) at December 31, 2005 and 2006,
are presented below (in thousands):


<Table>
<Caption>
                                                           2005       2006
                                                         --------   --------

<S>                                                      <C>        <C>

Deferred revenues......................................  $ 11,477   $ 13,300
  Foreign tax credit carryforwards.....................    23,697     15,108
  Research and experimentation credit carryforwards....     3,969      3,202
  AMT credits..........................................       386        115
  Acquisition-related items............................     6,240      5,734
  Depreciation, amortization and capitalized interest..    (1,948)    (2,308)
  Capitalized software costs...........................    (8,952)    (9,121)
  Net operating loss carryforwards.....................    57,738     62,390
  Foreign currency loss................................     1,589      1,556
  Inventories..........................................        77        109
  Share-based compensation.............................        --      2,016
  Allowances, accruals and other.......................     3,477      4,308
                                                         --------   --------
Total gross deferred income taxes......................    97,750     96,409
  Less valuation allowance.............................   (59,637)   (64,727)
                                                         --------   --------
Net deferred income tax asset..........................  $ 38,113   $ 31,682
                                                         ========   ========
Balance sheet classification:
  Current deferred income taxes........................  $  5,624   $  3,784
  Noncurrent deferred income tax asset.................    32,938     28,714
  Current deferred income tax liability (included in
     income tax payable)...............................        --        (21)
  Noncurrent deferred income tax liability.............      (449)      (795)
                                                         --------   --------
Net deferred income taxes..............................  $ 38,113   $ 31,682
                                                         ========   ========

</Table>


     In assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred tax
assets will not be realized. The ultimate realization of deferred tax assets is
dependent upon the generation of future taxable income during the periods in
which those temporary differences become deductible. Management considers the
scheduled reversals of deferred tax liabilities, projected future taxable
income, and tax planning strategies in making this assessment. During the fourth
quarter 2006, the Company became aware of information related to its ongoing
worldwide tax audits that has caused it to determine that certain tax attributes
on its balance sheet may no longer be able to be realizable. The Company has
estimated the possible loss of these tax attributes to be $6.9 million and has
recognized an income tax expense in 2006 with a corresponding decrease in
selected tax attributes on its balance sheet.

     As of December 31, 2006, SPSS has a U.S. net operating loss carryforwards
of approximately $95.7 million, the majority of which begins to expire in 2021.
The Company has provided a valuation on $89.9 million of the U.S. net operating
loss carryforwards. In addition, as of December 31, 2006, the Company has
foreign net operating loss carryforwards of approximately $79.2 million against
which the Company has provided a valuation allowance on $69.1 million.

     At December 31, 2006, the Company has foreign tax credit carryforwards of
$15.1 million, which begin to expire in 2010. The Company has a valuation
allowance of $7.8 million against these credits.

     As of December 31, 2006, SPSS had a Federal research and experimentation
credit carryforward of approximately $3.2 million, which begins to expire in
2010. The Company has a valuation allowance of $0.4 million, against these
credits.

     Federal income and foreign withholding taxes have not been provided on
$63.0 million of undistributed earnings of international subsidiaries of which
$33.3 million has been previously taxed in the United States. The

                                       60

<PAGE>

Company has not recognized a deferred tax liability for the undistributed
earnings of its foreign operations that arose in 2006 and prior years because
the Company currently does not expect to remit those earnings in the foreseeable
future. Determination of the amount of unrecognized deferred tax liability
related to undistributed earnings of foreign subsidiaries is not practicable.

     In June 2006, the FASB issued Interpretation No. 48 (FIN 48), "Accounting
for Uncertainty in Income Taxes -- an Interpretation of SFAS No. 109." FIN 48
clarifies the accounting for uncertainty in income taxes recognized in an
enterprise's financial statements in accordance with SFAS No. 109, "Accounting
for Income Taxes." FIN 48 prescribes a recognition threshold and measurement of
a tax position taken or expected to be taken in an enterprise's tax return. In
addition, FIN 48 provides guidance on derecognition, classification, interest,
penalties, accounting in interim periods and disclosure related to uncertain
income tax positions. FIN 48 is effective for fiscal years beginning after
December 15, 2006. The Company will adopt FIN 48 as of January 1, 2007, as
required. The Company is currently evaluating the impact that the adoption of
FIN 48 will have, if any, on its consolidated financial statements and notes
thereto. However, the Company does not expect the adoption of FIN 48 to have a
material effect on its financial position or operating results.

(13) COST MANAGEMENT PROGRAMS

     During the fourth quarter 2006, the Company incurred certain expenses
totaling $0.9 million related to the closure of its Amsterdam facility. These
costs included lease termination costs, severance payments for fifteen employees
and a loss on the disposal of surplus fixed assets. As of December 31, 2006, the
Company has approximately $0.7 million in liabilities remaining related to these
expenses and expects the liability to be paid in 2007.

(14) EMPLOYEE BENEFIT PLANS

     Qualified employees may participate in the 401(k) savings plan by
contributing up to the lesser of 15% of eligible compensation or limits imposed
by the U.S. Internal Revenue Code in a calendar year. SPSS makes a matching
contribution for employees in the plan the entire year. SPSS made contributions
of $0.3 million, $0.4 million and $0.4 million for 2004, 2005, and 2006,
respectively. These matching contributions were recorded as compensation
expense.

     In 1993, SPSS implemented a qualified employee stock purchase plan. The
employee stock purchase plan provided that eligible employees could contribute
up to 10% of their base salary per quarter toward the quarterly purchase of SPSS
common stock. The employee's purchase price was 85% of the fair market value of
the stock at the close of the first business day after the quarterly offering
period. The total number of shares issuable under the purchase plan was 100
thousand. Effective October 2000, the plan was amended to calculate the share
price as 85% of the lower of: i) the closing market price of the stock on the
first trading day of the quarter, or ii) the closing market price for the stock
on the last trading day after the end of the quarter. Additionally, in October
2000, a non-qualified plan was adopted by the Company's shareholders, but not
utilized until 2004. During 2004, 6 thousand shares were issued under the
qualified purchase plan at a market price of $17.88. Because no additional
shares were available for issuance under the qualified purchase plan, SPSS
terminated the qualified purchase plan in the first quarter of 2005. During
2004, 17 thousand shares were issued under the non-qualified purchase plan at
market prices ranging from $13.33 -- $18.40. During the first quarter of 2005,
there were 8 thousand shares issued under the non-qualified plan with a market
price of $13.54. During the first quarter of 2005, SPSS terminated the non-
qualified purchase plan.

     At the annual stockholders' meeting held on June 15, 2005, the SPSS
stockholders approved a new qualified employee stock purchase plan. There are
500 thousand shares of SPSS common stock authorized for issuance over the term
of the stock purchase plan. The shares are offered for purchase through a series
of six-month contribution periods extending from January 1 through June 30 and
July 1 through December 31 of each year. The SPSS purchase plan provides that
eligible employees may elect to have between 1% and 15% of their total
compensation withheld and applied to the purchase of shares of SPSS common stock
on the last day of each contribution period. The employee's purchase price of
SPSS common stock will equal the lesser of i) 85% of the fair market value of
the SPSS common stock on the first business day of the contribution period, or
ii) 85% of the fair market value of the SPSS common stock on the last business
day of the contribution period. There is a maximum of 4 thousand shares

                                       61

<PAGE>

that each eligible employee may purchase each contribution period. There were 42
thousand shares issued under this qualified plan during 2006.

(15) STOCK COMPENSATION PLANS

  SHARE-BASED COMPENSATION

     In December 2004, the FASB issued SFAS No. 123(R), Share-Based Payment
("SFAS No. 123(R)" or the "Statement"). This Statement is a revision of SFAS No.
123, Accounting for Stock-Based Compensation ("SFAS No. 123"), and supersedes
Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to
Employees ("APB No. 25"), and its related implementation guidance. On January 1,
2006, the Company adopted the provisions of SFAS No. 123(R) using the modified
prospective method. SFAS No. 123(R) focuses primarily on accounting for
transactions in which an entity obtains employee services in share-based payment
transactions. The Statement requires entities to recognize compensation expense
for awards of equity instruments to employees based on the grant-date fair value
of those awards (with limited exceptions). SFAS No. 123(R) also requires the
benefits of tax deductions in excess of recognized compensation expense to be
reported as a financing cash flow, rather than as an operating cash flow as
prescribed under the prior accounting rules. This requirement reduces net
operating cash flows and increases net financing cash flows in periods after
adoption. Total cash flow remains unchanged from what would have been reported
under prior accounting rules.

     Prior to the adoption of SFAS No. 123(R), the Company followed the
intrinsic value method in accordance with APB No. 25 to account for its employee
stock options and share-based awards in 2004 and 2005. Accordingly, no
compensation expense was recognized for share based awards granted in connection
with the issuance of stock options under the Company's equity incentive plans in
those years; however, compensation expense was recognized in connection with the
issuance of restricted share units, the discount provided on shares issued under
the employee stock purchase plan, and stock options granted to non-employees
under the Company's equity incentive plans. The adoption of SFAS No. 123(R)
primarily resulted in a change in the Company's method of recognizing the fair
value of share-based compensation and estimating forfeitures for all unvested
awards. Specifically, the adoption of SFAS No. 123(R) resulted in the Company
recording compensation expense for employee stock options and employee share-
based awards granted prior to the adoption using the Black-Scholes pricing
valuation model. As of December 31, 2006, there was approximately $2.8 million
of unrecognized compensation cost related to unvested stock options granted
prior to the adoption of SFAS No. 123(R). This cost will be recognized over an
estimated weighted average period of 1.6 years. Additionally, the Company
presented all tax benefits resulting from the exercise of stock options as
operating cash flows in the Consolidated Statement of Cash Flows prior to the
adoption of SFAS No. 123(R). It is now required that cash flows from the
exercise of stock options resulting from tax benefits in excess of recognized
cumulative compensation cost (excess tax benefits) be classified as financing
cash flows with a corresponding increase in deferred income taxes reported as an
operating cash outflow. The Company's excess tax benefits, classified as
financing cash flows, for the year ended December 31, 2006 was $3.4 million.
SFAS No. 123(R) also required the beginning balance of deferred compensation to
be reclassified to additional paid in capital.

     Share-based compensation expense, including expense related to restricted
share units, under the provision of SFAS No. 123(R) and APB No. 25 was comprised
as follows (in thousands):


<Table>
<Caption>
                                                         FOR THE YEAR ENDED
                                                            DECEMBER 31,
                                                        --------------------
                                                        2004   2005    2006
                                                        ----   ----   ------

<S>                                                     <C>    <C>    <C>

Sales, Marketing and Services.........................  $ --   $ --   $2,022
Research and Development..............................    --     --    1,425
General and Administrative............................   240    504    3,257
                                                        ----   ----   ------
Total share-based compensation expense................  $240   $504   $6,704
                                                        ====   ====   ======

</Table>




                                       62

<PAGE>

     The Company elected to adopt the modified prospective method as provided by
SFAS No. 123(R). Accordingly, previously reported amounts have not been
restated. The effects of the adoption were as follows (in thousands, except per
share data):


<Table>
<Caption>
                                                                 YEAR ENDED
                                                                DECEMBER 31,
                                                                    2006
                                                            -------------------
                                                            INCREASE (DECREASE)

<S>                                                         <C>

Income before income taxes................................        $(3,105)
Net Income................................................         (1,900)
Cash flows from operating activities......................         (5,334)
Cash flows from financing activities......................          3,434
Basic earnings per share..................................        $ (0.10)
Diluted earnings per share................................        $ (0.09)
</Table>



     Results for fiscal years 2004 and 2005 have not been restated as the
Company adopted the provisions of SFAS No. 123(R) using the modified prospective
method. Had compensation expense for employee stock options and employee share-
based awards under the Company's equity incentive plans been determined based on
fair value at the grant date consistent with SFAS No. 123, the Company's net
income and earnings per share for years ended December 31, 2004 and 2005 would
have been reduced to the pro forma amounts indicated below (in thousands, except
share data):


<Table>
<Caption>
                                                             FOR THE YEARS
                                                             ENDED DECEMBER
                                                                  31,
                                                           -----------------
                                                             2004      2005
                                                           -------   -------

<S>                                                        <C>       <C>

Net income, as reported..................................  $ 5,543   $16,092
Add:
  Stock-based employee compensation cost, net of related
     tax, included in net income, as reported............       60       281
Deduct:
  Total stock-based employee compensation expense
     determined under the fair value based method for all
     awards, net of related taxes........................   (4,195)   (2,536)
                                                           -------   -------
Pro forma net income.....................................  $ 1,408   $13,837
                                                           =======   =======
Income per share:
  Basic -- as reported...................................  $  0.31   $  0.88
  Basic -- pro forma.....................................  $  0.08   $  0.76
  Diluted -- as reported.................................  $  0.31   $  0.85
  Diluted -- pro forma...................................  $  0.08   $  0.73
</Table>


     For purposes of calculating the compensation expense consistent with SFAS
No. 123(R), the fair value of each grant is estimated on the date of grant using
the Black-Scholes option-pricing model. The following weighted-average
assumptions were used:


<Table>
<Caption>
                                                 FOR THE YEARS ENDED DECEMBER 31,
                                             ---------------------------------------
                                                 2004          2005          2006
                                             -----------   -----------   -----------

<S>                                          <C>           <C>           <C>

Expected volatility........................        37.88%        37.49%        37.09%
Expected dividend yield....................           --%           --%           --%
Expected risk-free interest rate...........         4.18%         4.06%         4.92%
Expected term of options...................   8.00 years    8.00 years    6.15 years
Maximum contractual term...................     10 years      10 years      10 years
Weighted average grant date fair value of
  options granted..........................  $      8.08   $      9.61   $     14.83
</Table>




                                       63

<PAGE>

     The Company uses historical data to estimate volatility, the expected term
and forfeitures of awards due to employee terminations in order to estimate
compensation cost for awards expected to vest.

  EQUITY INCENTIVE PLANS

     In June 1995, the stockholders of SPSS adopted the 1995 Equity Incentive
Plan which authorized the Board of Directors, under some conditions, to grant
stock options and shares of restricted stock to directors, officers, other key
executives, employees and independent contractors.

     At the 1996 meeting of SPSS stockholders, the stockholders adopted the
Amended and Restated 1995 Equity Incentive Plan, which was amended, among other
things, to increase the shares allowed to be granted under the plan from 600
thousand to 1.1 million. At the 1998 meeting of SPSS stockholders, the
stockholders adopted the Second Amended and Restated 1995 Equity Incentive Plan,
which was amended, among other things, to increase the shares allowed to be
granted under the plan from 1.1 million to 1.8 million. In May 1999, SPSS
approved the Third Amended and Restated 1995 Equity Incentive Plan, which was
amended to clarify the rules governing the treatment of attestation of shares
given to SPSS for the exercise price of options.

     In May 1999, SPSS adopted the 1999 Employee Equity Incentive Plan, which
authorizes the Board, under some conditions, to grant stock options and shares
of restricted stock to non-executive officer employees and independent
contractors of SPSS.

     In February 2001, the stockholders of SPSS adopted the 2000 Equity
Incentive Plan which authorizes the Board of Directors, under some conditions,
to grant stock options and shares of restricted stock to directors, officers,
other key executives, employees and independent contractors. There were 500
thousand shares reserved for issuance under this plan.

     In 2002, SPSS terminated each of its existing equity incentive plans and
the stockholders of SPSS adopted the 2002 Equity Incentive Plan. This plan was
amended and restated in October 2004 and, again, in April 2006. The plan
authorizes the Board of Directors to award stock options and a variety of other
equity incentives to directors, officers, employees and independent contractors
of SPSS and any of its subsidiaries. Under this plan, there are 80 thousand
shares reserved for issuance upon the exercise of option rights that qualify as
incentive stock options and 4.4 million shares reserved for issuance upon the
exercise of option rights that qualify as nonqualified stock options,
appreciation rights or as restricted shares.

     Additional information regarding options is as follows (in thousands,
except per share data):


<Table>
<Caption>
                                       2004                2005                       2006
                                ------------------  ------------------  -------------------------------
                                          WEIGHTED            WEIGHTED            WEIGHTED    WEIGHTED
                                          AVERAGE             AVERAGE             AVERAGE     AVERAGE
                                          EXERCISE            EXERCISE            EXERCISE   REMAINING
                                           PRICE               PRICE               PRICE    CONTRACTUAL
                                OPTIONS  PER SHARE  OPTIONS  PER SHARE  OPTIONS  PER SHARE      LIFE
                                -------  ---------  -------  ---------  -------  ---------  -----------

<S>                             <C>      <C>        <C>      <C>        <C>      <C>        <C>

Outstanding at beginning of
  year........................   4,520     $19.01     4,695    $18.87    3,263     $18.95       6.10
  Granted.....................     773      16.78       140     17.46       35      33.57       9.34
  Forfeited and expired.......    (341)     19.54      (562)    20.92     (140)     23.83       7.71
  Exercised...................    (257)     14.17    (1,010)    17.28     (981)     19.21       4.34
                                 -----     ------    ------    ------    -----     ------
Outstanding at end of year....   4,695     $18.87     3,263    $18.95    2,177     $18.76       5.46
                                 =====     ======    ======    ======    =====     ======

</Table>




<Table>
<Caption>
                                                        FOR THE YEARS ENDED
                                                            DECEMBER 31,
                                                     -------------------------
                                                      2004     2005      2006
                                                     ------   ------   -------

<S>                                                  <C>      <C>      <C>

Weighted average grant-date fair value of stock
  options granted..................................  $ 8.52   $ 8.77   $ 14.83
                                                     ======   ======   =======
Total fair value of stock options vested...........   6,441    6,007     3,892
                                                     ======   ======   =======
Total intrinsic value of stock options exercised...     922    8,726    14,165
                                                     ======   ======   =======

</Table>




                                       64

<PAGE>

<Table>
<Caption>
                                                              WEIGHTED    WEIGHTED
                                                               AVERAGE     AVERAGE
                                                             GRANT DATE   EXERCISE
                                                   OPTIONS   FAIR VALUE     PRICE
                                                   -------   ----------   --------

<S>                                                <C>       <C>          <C>

Non-vested options at December 31, 2006..........     384       $8.64      $16.99
                                                    =====       =====      ======
Vested options at December 31, 2006..............   1,793       $9.79      $19.14
                                                    =====       =====      ======

</Table>


     The aggregate intrinsic value of stock options outstanding as of December
31, 2006 was $25.1 million.

     Additional information regarding stock options that are exercisable at the
end of each fiscal year is as follows (in thousands, except per share data):


<Table>
<Caption>
                                                        FOR THE YEARS ENDED
                                                            DECEMBER 31,
                                                     -------------------------
                                                      2004     2005      2006
                                                     ------   ------   -------

<S>                                                  <C>      <C>      <C>

Options exercisable at year end....................   3,047    2,309     1,793
Weighted average exercise price per share..........  $19.93   $19.75   $ 19.14
Weighted average remaining contractual life........    5.48     5.34      5.05
Aggregate intrinsic value..........................  $2,042   $5,719   $20,053
</Table>


     The following table summarizes information about stock options outstanding
at December 31, 2006:


<Table>
<Caption>
                                    WEIGHTED AVERAGE
RANGE OF EXERCISE       OPTIONS         REMAINING      WEIGHTED AVERAGE     OPTIONS     WEIGHTED AVERAGE
PRICES                OUTSTANDING   CONTRACTUAL LIFE    EXERCISE PRICE    EXERCISABLE    EXERCISE PRICE
-----------------     -----------   ----------------   ----------------   -----------   ----------------
                                       (OPTION DATA IN THOUSANDS, EXCEPT PER SHARE DATE)

<S>                   <C>           <C>                <C>                <C>           <C>

 4.26 -  4.50.......         8            1.31                4.48               8             4.48
 5.98 - 10.93.......         1            2.19                6.91               1             6.91
11.00 - 15.98.......       636            6.93               14.66             479            14.58
16.00 - 17.25.......       359            6.99               16.96             215            16.97
17.50 - 19.09.......       416            4.90               18.61             407            18.64
19.25 - 24.00.......       555            4.01               21.23             481            21.20
25.12 - 34.15.......       198            3.50               27.86             198            27.86
40.91 - 199.74......         4            2.30               79.60               4            79.60
                         -----            ----              ------           -----           ------
                         2,177            5.46              $18.76           1,793           $19.14
                         =====            ====              ======           =====           ======

</Table>


     The Company has one active equity incentive plan with 2.0 million shares
available for grant at December 31, 2006.

  RESTRICTED SHARE UNITS

     The Company began issuing Restricted Share Units (RSUs) in 2005. Each RSU
awarded represents the right to receive one share of SPSS common stock on the
date that the award vests. Generally, these grants vest ratably over a two or
four year period. In 2006, the Company also issued Deferred Share Units (DSUs)
to its directors. The DSUs are similar to the RSUs, except that the DSUs vest
immediately, but the underlying shares are not delivered until a director leaves
the Board of Directors. Compensation expense for both RSUs and DSUs is the
product of the number of shares issued and the market value at the time of
issuance. The RSUs are structured as deferred compensation and are being
amortized on a straight-line basis over the related vesting period. The DSUs
vest immediately and, therefore, the expense is recognized immediately. As the
RSUs vest, the holder has the option to surrender RSUs as consideration for
taxes associated with the transaction. In 2006, there were approximately 11
thousand RSUs surrendered for taxes. As of December 31, 2006, there was
approximately $5.8 million of unrecognized compensation cost related to RSUs
that will be recognized over an estimate weighted average period of 1.3 years.


                                       65

<PAGE>

     Additional information regarding Restricted Share Units is as follows (in
thousands, except fair value data):


<Table>
<Caption>
                                               WEIGHTED AVERAGE          WEIGHTED AVERAGE
                                        2005      FAIR VALUE      2006      FAIR VALUE
                                        ----   ----------------   ----   ----------------

<S>                                     <C>    <C>                <C>    <C>

Outstanding at beginning of year......   --         $   --          78        $18.20
Share units granted...................   84         $18.10         250        $33.88
Share units forfeited.................   (6)        $16.64         (18)       $25.91
Share units vested....................   --         $   --         (37)       $18.29
                                         --                        ---
Outstanding at end of year............   78         $18.20         273        $32.03
                                         ==                        ===

</Table>


     The total amount of RSU and DSU expense included in the total share-based
compensation expense noted above is $392 and $3,449 in 2005 and 2006,
respectively.

(16) CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     Transactions with Virtela Communications Inc.  Dr. Promod Haque, a former
member of the Board whose term expired at the 2006 Annual Meeting of
Stockholders on April 27, 2006, is also the managing partner of Norwest Venture
Partners and a member of the Board of Directors of Virtela Communications Inc.
Norwest Venture Partners owns approximately 37% of the voting stock of Virtela
(approximately 30% of the stock on a fully diluted basis). By virtue of Dr.
Haque's relationship with Norwest, Dr. Haque has an indirect interest in
Virtela. SPSS receives various networking services from Virtela. During fiscal
year 2006, SPSS paid approximately $0.7 million to Virtela as consideration for
these services. Dr. Haque did not receive and will not receive any direct
remuneration in connection with the Company's transactions with Virtela.

     Transactions with Persistent Systems, Inc.  Dr. Haque is also a member of
the Board of Directors of Persistent Systems, Inc. Norwest Venture Partners, of
which Dr. Haque is a managing partner, owns approximately 19% of the voting
stock of Persistent (approximately 15% of the stock on a fully diluted basis).
By virtue of Dr. Haque's relationship with Norwest, Dr. Haque has an indirect
interest in Persistent. SPSS receives development outsourcing services from
Persistent. During fiscal year 2006, SPSS paid $2.4 million to Persistent as
consideration for these services. Dr. Haque did not receive and will not receive
any direct remuneration in connection with the Company's transactions with
Persistent.

(17) STOCK OPTION RECLASSIFICATION

     During 2006, the Company completed a detailed review of its accounting for
stock option grants from the date of its initial public offering in 1993 through
2006. The review indicated that, in a number of instances, the actual
measurement dates for stock option grants differed from the measurement dates
originally used for such awards. Based on the use of revised measurement dates,
the Company determined that aggregate non-cash compensation expense of $5.3
million ($3.3 million net of tax) should have been recorded for those awards
granted during the period under review. Accordingly, during the current year,
the Company reclassified approximately $3.3 million of retained earnings to
additional paid-in capital. This reclassification to the December 31, 2005
balances decreased retained earnings by $3.3 million and increased additional
paid in capital by a corresponding amount, resulting in no net effect on total
stockholders' equity. The Company has completed its review of stock option
grants and has determined that no further accounting adjustments are necessary.

     The Company considers the impact on its current period financial statements
to be immaterial and does not intend to restate its financial statements for any
prior periods. There was no effect on 2004, 2005 or 2006 previously reported
results from operations. In addition, for the five-year period ended December
31, 2005, the net adjustment to previously reported diluted earnings per share
due to additional compensation expense did not exceed $0.01 per diluted share in
any individual year and the net cumulative five-year impact on net income was
approximately $0.1 million, less than $0.01 per diluted share.


                                       66

<PAGE>

(18) COMMON STOCK

     Authorized Capital Stock.  Under the Company's certificate of
incorporation, its authorized capital stock consists of 50,000,000 shares of
common stock, $0.01 par value per share.

     Voting Rights.  Each holder of the Company's common stock is entitled to
one vote for each share of common stock held of record on the applicable record
date in the election of directors and on all other matters submitted to a vote
of stockholders. Holders of the Company's common stock do not have cumulative
voting rights.

     Dividend Rights; Rights Upon Liquidation.  The holders of the Company's
common stock are entitled to receive pro rata, from funds legally available,
dividends when and as declared by resolution of the board of directors. In the
event of liquidation, each share of the Company's common stock is entitled to
share pro rata in any distribution of the Company's assets after provision for
the payment of all liabilities.

     Other Matters.  Holders of the Company's common stock have no preemptive,
conversion or other subscription rights to purchase, subscribe for or otherwise
acquire any unissued or treasury shares or other securities. There are no
redemption rights or sinking fund provisions with respect to the common stock.
Holders of common stock are not subject to further call or assessment.

     Common Stock Purchase Rights.  A common stock purchase right is attached to
each share of the Company's common stock. This common stock purchase right
entitles its holder to purchase from the Company one share of common stock at a
price of $175 per share upon the earlier to occur of (i) 10 days following a
public announcement that a person has acquired beneficial ownership of 15% or
more of the outstanding shares of the Company's common stock or (ii) 10 business
days following the commencement of, or announcement of an intention to make, a
tender offer or exchange offer by a person that would result in such person
becoming the beneficial owner of 15% or more of the outstanding shares of the
Company's common stock. Until such time, these common stock purchase rights are
not exercisable and are not freely tradable separate from the common stock.

     At such time as a person acquires beneficial ownership of 15% or more of
the outstanding shares of the Company's common stock (such person being referred
to as an "acquiring person") then each holder of a common stock purchase right,
other than the acquiring person, shall have the right to receive, upon
exercising the right, that number of shares of common stock having a market
value of two times the exercise price of the common stock purchase right. The
common stock purchase rights will expire on June 18, 2008 unless their
expiration date is extended or unless the common stock purchase rights are
earlier redeemed. The Company may redeem the common stock purchase rights, in
whole but not in part, at a price of $0.01 per common stock purchase right at
any time before they become exercisable.


                                       67

<PAGE>

(19) UNAUDITED QUARTERLY FINANCIAL INFORMATION

     The following selected quarterly data should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations". This information has been derived from unaudited consolidated
financial statements of SPSS that, in our opinion, reflect all recurring
adjustments necessary to fairly present our financial information when read in
conjunction with our Consolidated Financial Statements and Notes. The results of
operations for any quarter are not necessarily indicative of the results to be
expected for any future period.


<Table>
<Caption>
                             MAR. 31,   JUNE 30,   SEPT. 30,   DEC. 31,   MAR. 31,   JUNE 30,   SEPT. 30,   DEC. 31,
                               2005       2005        2005       2005       2006       2006        2006       2006
                             --------   --------   ---------   --------   --------   --------   ---------   --------
                                                      (IN THOUSANDS, EXCEPT PER SHARE DATA)

<S>                          <C>        <C>        <C>         <C>        <C>        <C>        <C>         <C>

Net revenues:
  License Fees.............   $25,997    $24,413    $27,359     $29,799    $29,873    $29,312    $30,013     $35,819
  Maintenance..............    25,312     26,448     25,028      25,453     26,063     27,428     27,970      27,816
  Services.................     6,147      7,220      5,905       6,982      6,290      6,739      6,701       7,508
                              -------    -------    -------     -------    -------    -------    -------     -------
     Net revenues..........    57,456     58,081     58,292      62,234     62,226     63,479     64,684      71,143
Operating expenses:
  Cost of license and
     maintenance revenues..     3,701      4,066      3,984       4,630      4,150      4,046      4,253       5,030
  Cost of license and
     maintenance
     revenues -- software
     write-offs............        --         --         --          --      1,283         --         --          --
  Sales, marketing and
     services..............    30,278     29,247     28,322      30,025     30,396     31,561     31,448      30,722
  Research and
     development...........    11,404     10,994     11,213      11,807     12,829     13,089     11,414      14,263
  General and
     administrative........     8,091      6,486      6,606       7,185      6,616      8,761      7,935       9,433
                              -------    -------    -------     -------    -------    -------    -------     -------
     Operating expenses....    53,474     50,793     50,125      53,647     55,274     57,457     55,050      59,448
Operating income...........     3,982      7,288      8,167       8,587      6,952      6,022      9,634      11,695
Other income (expenses)....      (474)    (1,483)      (189)      1,294        496     (1,552)      (692)      1,906
                              -------    -------    -------     -------    -------    -------    -------     -------
Income before income
  taxes....................     3,508      5,805      7,978       9,881      7,448      4,470      8,942      13,601
Income tax expense.........     1,088      2,075      3,926       3,991      2,607      1,922      3,189      11,603
                              -------    -------    -------     -------    -------    -------    -------     -------
Net income.................   $ 2,420    $ 3,730    $ 4,052     $ 5,890    $ 4,841    $ 2,548    $ 5,753     $ 1,998
                              =======    =======    =======     =======    =======    =======    =======     =======
Basic net income per
  share....................   $  0.14    $  0.21    $  0.23     $  0.32    $  0.25    $  0.13    $  0.29     $  0.10
                              =======    =======    =======     =======    =======    =======    =======     =======
Diluted net income per
  share....................   $  0.13    $  0.21    $  0.22     $  0.30    $  0.24    $  0.12    $  0.28     $  0.10
                              =======    =======    =======     =======    =======    =======    =======     =======
Shares used in basic per
  share....................    17,760     17,823     17,901      18,308     19,294     19,473     19,697      19,733
                              =======    =======    =======     =======    =======    =======    =======     =======
Shares used in diluted per
  share....................    18,002     18,095     18,647      19,516     20,266     20,922     20,649      20,794
                              =======    =======    =======     =======    =======    =======    =======     =======

</Table>




                                       68

<PAGE>

                                                                     SCHEDULE II

                                    SPSS INC.

                        VALUATION AND QUALIFYING ACCOUNTS
                  YEARS ENDED DECEMBER 31, 2004, 2005 AND 2006
                                 (IN THOUSANDS)



<Table>
<Caption>
                                                                  ADDITIONS
                                                    ------------------------------------
                                       BALANCE AT   CHARGED TO                             BALANCE AT
                                        BEGINNING    COSTS AND   CHARGED TO                  END OF
DESCRIPTION                             OF PERIOD    EXPENSES     REVENUES    DEDUCTIONS     PERIOD
-----------                            ----------   ----------   ----------   ----------   ----------

<S>                                    <C>          <C>          <C>          <C>          <C>

2004
Allowance for doubtful accounts,
  product returns, and
  cancellations......................    $3,635        $291        $1,061       $2,522       $2,465
Inventory obsolescence reserve.......       212         299            --          200          311
2005
Allowance for doubtful accounts,
  product returns, and
  cancellations......................    $2,465        $151        $1,610       $2,478       $1,748
Inventory obsolescence reserve.......       311         411            --          398          324
2006
Allowance for doubtful accounts,
  product returns, and
  cancellations......................    $1,748        $163        $1,995       $1,920       $1,986
Inventory obsolescence reserve.......       324          52            --           67          309
</Table>



   See accompanying reports of independent registered public accounting firm.


                                       69

<PAGE>

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE

     N/A.

ITEM 9A.  CONTROLS AND PROCEDURES

     a. Disclosure Controls and Procedures.  SPSS maintains disclosure controls
and procedures that have been designed to ensure that information related to the
Company is recorded, processed, summarized and reported on a timely basis. SPSS
reviews these disclosure controls and procedures on a periodic basis. In
connection with this review, SPSS has established a committee referred to as the
"Disclosure Committee" that is responsible for accumulating potentially material
information regarding the Company's activities and considering the materiality
of this information. This Disclosure Committee (or a subcommittee) is also
responsible for making recommendations regarding disclosure and communicating
this information to the Company's Chief Executive Officer and Chief Financial
Officer to allow timely decisions regarding required disclosure. The Disclosure
Committee is comprised of the Company's associate general counsel, principal
accounting officer, senior manager in charge of investor relations, principal
risk management officer, chief information officer and certain other members of
the SPSS senior management.

     The Company's Chief Executive Officer and Chief Financial Officer, with the
participation of the Disclosure Committee, evaluated the effectiveness of the
design and operation of the Company's disclosure controls and procedures as of
the end of the period covered by this Annual Report, as required by Rule 13a-15
of the Securities Exchange Act of 1934. Based on this evaluation, our Chief
Executive Officer and Chief Financial Officer concluded that as of the end of
the period covered by this Annual Report, the Company's disclosure controls and
procedures were effective in ensuring that the information required to be
disclosed by the Company in the reports it files or submits under the Securities
Exchange Act of 1934 is recorded, processed, summarized and reported within the
time periods specified in the rules and forms of the SEC.

     b. Internal Control Over Financial Reporting.  Management's Report on
Internal Control Over Financial Reporting and the Attestation Report of the
Registered Public Accounting Firm are included in Part II, Item 8 of this Annual
Report.

     c. Changes in Internal Control Over Financial Reporting.  There were no
changes in the Company's internal control over financial reporting that occurred
during the Company's last fiscal quarter of the period covered by this Annual
Report that have materially affected, or are reasonably likely to materially
affect, the Company's internal control over financial reporting.

ITEM 9B.  OTHER INFORMATION

     None.


                                       70

<PAGE>

                                    PART III

ITEM 10.  DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

     The information required by this Item 10 is included in the Company's
definitive proxy statement, which is to be filed with the Securities and
Exchange Commission within 120 days after the end of the Company's fiscal year
ended December 31, 2006 and distributed in connection with the Company's 2007
Annual Meeting of Stockholders to be held on April 26, 2007, and such
information is incorporated herein by reference.

     Information related to this Item 10, "Directors, Executive Officers and
Corporate Governance" appears under the captions: "Election of Directors,"
"Officers and Directors," "Section 16(a) Beneficial Ownership Reporting
Compliance" and "Information Concerning the Board of Directors -- Board
Committees -- Audit Committee" in the definitive proxy statement.

CODE OF ETHICS

     SPSS has adopted the SPSS Inc. Amended and Restated Code of Business
Conduct & Ethics (the "Code of Ethics") which is applicable to all of the SPSS
directors, officers and employees, including the Company's Chief Executive
Officer, Chief Financial Officer, Controller and other senior financial officers
performing similar functions. The Code of Ethics satisfies, and in many respects
exceeds, all of the requirements of the Sarbanes-Oxley Act of 2002 and the rules
and regulations promulgated by the Securities and Exchange Commission pursuant
to the Sarbanes-Oxley Act. The Code of Ethics also satisfies, and in many
respects exceeds, the listing standards established by the Nasdaq Stock Market,
the stock market on which the Company's stock is listed. The Company has posted
the Code of Ethics on its website at http://www.spss.com. The Company will
furnish a copy of the Code of Ethics to any person, without charge, upon written
request directed to: Corporate Secretary, SPSS Inc., 233 South Wacker Drive,
11th Floor, Chicago, Illinois 60606.

     SPSS has satisfied and intends to continue to satisfy its obligation to
disclose any amendment to or waiver of a provision of the Code of Ethics that
applies to the Company's Chief Executive Officer, Chief Financial Officer,
Controller and other senior financial officers performing similar functions by
posting such information on its website at http://www.spss.com.

ITEM 11.  EXECUTIVE COMPENSATION

     The information required by this Item 11 is included in the Company's
definitive proxy statement, which is to be filed with the Securities and
Exchange Commission within 120 days after the end of the Company's fiscal year
ended December 31, 2006 and distributed in connection with the Company's 2007
Annual Meeting of Stockholders to be held on April 26, 2007, and such
information is incorporated herein by reference.

     Information related to this Item 11, "Executive Compensation" appears under
the captions: "Compensation Discussion and Analysis," "Summary Compensation
Table," "Grants of Plan-Based Awards," "Outstanding Equity Awards at Fiscal Year
End," "Option Exercises and Stock Vested," "Potential Payments Upon Termination
or Change of Control," "Director Compensation," "Information Concerning the
Board of Directors -- Board Committees -- Compensation Committee -- Compensation
Committee Interlocks and Insider Participation" and "Information Concerning the
Board of Directors -- Board Committees -- Compensation Committee -- Compensation
Committee Report."

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
          RELATED STOCKHOLDER MATTERS

     The information required by this Item 12 is included in the Company's
definitive proxy statement, which is to be filed with the Securities and
Exchange Commission within 120 days after the end of the Company's fiscal year
ended December 31, 2006 and distributed in connection with the Company's 2007
Annual Meeting of Stockholders to be held on April 26, 2007, and such
information is incorporated herein by reference.


                                       71

<PAGE>

     Information related to this Item 12, "Security Ownership of Certain
Beneficial Owners and Management and Related Stockholder Matters" appears under
the caption "Security Ownership of Certain Beneficial Owners and Management" in
the definitive proxy statement.

SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS

     The table below sets forth information with regard to securities authorized
for issuance under Company's equity compensation plans as of December 31, 2006.
As of December 31, 2006, SPSS had two active equity compensation plans: (1) the
Second Amended and Restated 2002 Equity Incentive Plan (the "2002 Plan") and (2)
the SPSS Inc. Employee Stock Purchase Plan (the "ESPP"). SPSS has three
additional equity compensation plans under which exercisable options remain
outstanding. These three plans were terminated and are now considered inactive
because securities no longer remain available for future issuance under these
plans. These three terminated equity compensation plans are: the 2000 Equity
Incentive Plan (the "2000 Plan"), the 1999 Employee Equity Incentive Plan (the
"1999 Plan") and the Third Amended and Restated 1995 Equity Incentive Plan (the
"1995 Plan"). Information regarding the 2000 Plan, the 1999 Plan and the 1995
Plan is included in the table below because, as of December 31, 2006,
exercisable options remain outstanding under these three plans. Except for the
1999 Plan, all of the Company's equity compensation plans have been approved by
stockholders.


<Table>
<Caption>
                                                                                        NUMBER OF SECURITIES
                                                                                      REMAINING AVAILABLE FOR
                                                                                       FUTURE ISSUANCE UNDER
                                 NUMBER OF SECURITIES TO BE     WEIGHTED-AVERAGE     EQUITY COMPENSATION PLANS
                                   ISSUED UPON EXERCISE OF      EXERCISE PRICE OF      (EXCLUDING SECURITIES
                                    OUTSTANDING OPTIONS,      OUTSTANDING OPTIONS,        REFLECTED IN THE
PLAN CATEGORY                        WARRANTS AND RIGHTS       WARRANTS AND RIGHTS         FIRST COLUMN)
-------------                    --------------------------   --------------------   -------------------------

<S>                              <C>                          <C>                    <C>

Equity Compensation Plans
  Approved by Security
  Holders......................           1,921,818(1)               $17.89(2)               2,488,591(3)
Equity Compensation Plans Not
  Approved by Security
  Holders......................             544,946(4)               $21.36                         --
                                          ---------                  ------                  ---------
Total..........................           2,466,764                  $21.14                  2,488,591
</Table>


--------

   (1) Includes (a) options to purchase 1,242,207 shares of common stock issued
       under the 2002 Plan with a weighted average exercise price of $16.87, (b)
       272,716 shares of common stock to be issued upon the vesting of
       restricted share units issued under the 2002 Plan for which no exercise
       price will be paid, (c) 17,186 shares of common stock issued pursuant to
       the ESPP in connection with the July 2006 to December 2006 purchase
       period (which shares were actually issued in January 2007), (d) options
       to purchase 124,799 shares of common stock issued under the 2000 Plan
       with a weighted average exercise price of $19.36 and (e) options to
       purchase 264,910 shares of common stock issued under the 1995 Plan with a
       weighted average exercise price of $22.00.

   (2) The calculation of weighted average exercise price includes only
       outstanding options.

   (3) Consists of 2,047,954 shares of common stock that remain available for
       issuance under the 2002 Plan in the form of options, stock appreciation
       rights, restricted shares or restricted share units, and 440,637 shares
       of common stock that remain available for issuance pursuant to the ESPP.

   (4) Reflects options to purchase 544,946 shares of common stock issued under
       the 1999 Plan with a weighted average exercise price of $21.36.

     Pursuant to the 1999 Plan, SPSS was able to award nonqualified stock
options and restricted shares to non-executive officers, non-director employees
and independent contractors of SPSS and any of its subsidiaries. The Board
administered the 1999 Plan and was authorized to delegate this authority to the
Compensation Committee. The purpose of the 1999 Plan was to further the success
of SPSS by attracting outstanding employees and other talent and providing to
such persons incentives and rewards tied to the Company's business success. The
maximum number of shares of common stock that was permitted to be issued or
transferred under the 1999 Plan in any given calendar year was 3% of the
greatest number of total common stock outstanding in the previous calendar year.
The options awarded under the 1999 Plan had a term of 10 years and an option
price equal to the closing price of SPSS common stock on the respective dates of
grant. As stated above, securities no longer remain available for future
issuance under the 1999 Plan.


                                       72

<PAGE>

LTEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
          INDEPENDENCE

     The information required by this Item 13 is included in the Company's
definitive proxy statement, which is to be filed with the Securities and
Exchange Commission within 120 days after the end of the Company's fiscal year
ended December 31, 2006 and distributed in connection with the Company's 2007
Annual Meeting of Stockholders to be held on April 26, 2007, and such
information is incorporated herein by reference.

     Information related to this Item 13, "Certain Relationships and Related
Transactions, and Director Independence" appears under the captions: "Certain
Relationships and Related Transactions" and "Information Concerning the Board of
Directors -- Director Independence" in the definitive proxy statement.

ITEM 14.  PRINCIPAL ACCOUNTANT FEES AND SERVICES

     The information required by this Item 14 is included in the Company's
definitive proxy statement, which is to be filed with the Securities and
Exchange Commission within 120 days after the end of the Company's fiscal year
ended December 31, 2006 and distributed in connection with the Company's 2007
Annual Meeting of Stockholders to be held on April 26, 2007, and such
information is incorporated herein by reference.

     Information related to this Item 14, "Principal Accountant Fees and
Services" appears under the caption "Ratification of the Appointment of
Independent Auditors" in the definitive proxy statement.

                                     PART IV

ITEM 15.  EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

     (a) (1) Consolidated Financial Statements commence on page 39:

          Consolidated Balance Sheets as of December 31, 2005 and 2006

          Consolidated Statements of Income for the years ended December 31,
     2004, 2005 and 2006

          Consolidated Statements of Comprehensive Income for the years ended
     December 31, 2004, 2005 and 2006

          Consolidated Statements of Stockholders' Equity for the years ended
     December 31, 2004, 2005 and 2006

          Consolidated Statements of Cash Flows for the years ended December 31,
     2004, 2005 and 2006

          Notes to Consolidated Financial Statements

     (2) Consolidated Financial Statement Schedule -- see page 69:

          Schedule II Valuation and Qualifying Accounts

          Schedules not filed:

     All schedules other than that indicated in the index have been omitted as
the required information is inapplicable or the information is presented in the
consolidated financial statements or related notes.


                                       73

<PAGE>

     (3) Exhibits required by Item 601 of Regulation S-K. (Note: Management
contracts and compensatory plans or arrangements are identified with a "+" in
the following list.)


<Table>
<Caption>
                                                                              INCORPORATION
   EXHIBIT                                                                    BY REFERENCE
   NUMBER                        DESCRIPTION OF DOCUMENT                     (IF APPLICABLE)
   -------                       -----------------------                     ---------------

<S>            <C>                                                          <C>

     2.1       Stock Purchase Agreement dated as of November 4, 2003, by    (10), Ex. 2.15
               and among SPSS Inc., SPSS International B.V. and the
               owners of all of the issued and outstanding shares of Data
               Distilleries B.V. identified on Exhibit A thereto.
     3.1       Certificate of Incorporation of SPSS.                        (1), Ex. 3.2
     3.2       By-Laws of SPSS.                                             (1), Ex. 3.4
     4.1       Amended and Restated Rights Agreement, dated as of August    (11), Ex. 4.2
               31, 2004, by and between SPSS Inc. and Computershare
               Investor Services LLC, as Rights Agent
    10.1       Amended 1991 Stock Option Plan. +                            (1), Ex. 10.10
    10.2       1995 Equity Incentive Plan. +                                (2), Ex. 10.14
    10.3       Amended and Restated 1995 Equity Incentive Plan. +           (3), Appendix A
    10.4       Sublease Agreement, dated April 1, 1997, between Ernst &     (4), Ex. 10.20
               Young U.S. LLP and SPSS Inc.
    10.5       Second Amended and Restated 1995 Equity Incentive Plan. +    (5), Appendix A
    10.6       Third Amended and Restated 1995 Equity Incentive Plan. +     (6), Ex. 10.1
    10.7       2000 Equity Incentive Plan. +                                (7), Ex. 10.45
    10.8       1999 Employee Equity Incentive Plan. +                       (8), Ex. 4.1
    10.9       Loan and Security Agreement, dated as of March 31, 2003,     (9), Ex. 10.43
               by and between SPSS Inc. and each of SPSS' subsidiaries
               that may become additional borrowers, as Borrower, and
               Foothill Capital Corporation, as Lender.
    10.10      Amended and Restated Employment Agreement, dated as of       (12), Ex. 10.48
               August 16, 2004, by and between SPSS Inc. and Raymond H.
               Panza. +
    10.11      OEM Agreement, dated as of November 5, 2004, by and          (15), Ex. 10.50
               between SPSS Inc. and Hyperion Solutions Corporation*
    10.12      Amended and Restated Employment Agreement, dated as of       (12), Ex. 10.52
               March 1, 2005, by and between SPSS Inc. and Jack Noonan. +
    10.13      Form of Amended and Restated Change of Control Agreement +   (13), Ex. 10.53
    10.14      Form of Change of Control Agreement +                        (13), Ex. 10.54
    10.15      SPSS Inc. Employee Stock Purchase Plan +                     (14), Ex. 10.55
    10.16      Lease Agreement, dated as of November 22, 2005, by and       (16), Ex. 10.56
               between 233 S Wacker LLC and SPSS Inc.
    10.17      Distribution Agreement, dated as of January 3, 2006, by      (17), Ex. 10.57
               and between SPSS Inc. and Banta Global Turnkey Ltd.
    10.18      Second Amended and Restated 2002 Equity Incentive Plan +     (18), Appendix B
    10.19      Fourth Amendment to OEM Agreement, dated as of January 3,    (19), Ex. 10.1
               2007, by and between SPSS Inc. and Hyperion Solutions
               Corporation**
    10.20      2007 Executive Incentive Cash Compensation Plan +            (20), Ex. 10.1
    21.1       Subsidiaries.
    23.1       Consent of Grant Thornton LLP
    23.2       Consent of KPMG LLP
    31.1       Certification of the Chief Executive Officer and President
               pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
    31.2       Certification of the Chief Financial Officer pursuant to
               Section 302 of the Sarbanes-Oxley Act of 2002.
</Table>

                                       74

<PAGE>

<Table>
<Caption>
                                                                              INCORPORATION
   EXHIBIT                                                                    BY REFERENCE
   NUMBER                        DESCRIPTION OF DOCUMENT                     (IF APPLICABLE)
   -------                       -----------------------                     ---------------

<S>            <C>                                                          <C>
32.1           Certification of the Chief Executive Officer and President
               pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
               Section 906 of the Sarbanes-Oxley Act of 2002.
32.2           Certification of the Chief Financial Officer pursuant to
               18 U.S.C. Section 1350, as adopted pursuant to Section 906
               of the Sarbanes-Oxley Act of 2002.
</Table>


--------

     *  By order of the Securities and Exchange Commission dated January 23,
        2006, a request for confidential treatment has been granted for certain
        portions of this exhibit. Confidential portions of this exhibit are
        omitted and have been filed separately with the Securities and Exchange
        Commission pursuant to Rule 24b-2 under the Securities Exchange Act of
        1934.

     ** Portions of this Exhibit are omitted and have been filed separately with
        the Securities and Exchange Commission in connection with a pending
        request for confidential treatment of certain portions of the Exhibit
        pursuant to Rule 24b-2 under the Securities Exchange Act of 1934.

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

    (2) Previously filed with 1995 Proxy Statement of SPSS Inc. (File No. 000-
        22194)

    (3) Previously filed with 1996 Proxy Statement of SPSS Inc. (File No. 000-
        22194)

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

    (5) Previously filed with 1998 Proxy Statement of SPSS Inc. (File No. 000-
        22194)

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

    (7) Previously filed with the Registration Statement on Form S-4 on of SPSS
        Inc., filed on December 19, 2000. (File No. 333-52216)

    (8) Previously filed with the Registration Statement on Form S-8 of SPSS
        Inc. filed on September 15, 2000. (File No. 333-45900)

    (9) Previously filed with the Annual Report on Form 10-K of SPSS Inc. for
        the year ended December 31, 2002. (File No. 000-22194)

   (10) Previously filed with the Report on Form 8-K of SPSS Inc., dated
        November 5, 2003, filed on November 18, 2003. (File No. 000-22194)

   (11) Previously filed with the Form 8-A12G/A of SPSS Inc. filed on August 31,
        2004. (File No. 000-22194)

   (12) Previously filed with the Annual Report on Form 10-K of SPSS Inc. for
        the year ended December 31, 2004. (File No. 000-22194)

   (13) Previously filed with the Current Report on Form 8-K of SPSS Inc., dated
        April 28, 2005, filed on May 2, 2005. (File No. 000-22194)

   (14) Previously filed with the Current Report on Form 8-K of SPSS Inc., dated
        June 15, 2005, filed on June 15, 2005. (File No. 000-22194)

   (15) Previously filed with the Current Report on Form 8-K of SPSS Inc., dated
        November 5, 2004, filed on November 8, 2004, as amended on Form 8-K/A
        filed January 20, 2006. (File No. 000-22194)


                                       75

<PAGE>

   (16) Previously filed with the Current Report on Form 8-K of SPSS Inc., dated
        November 22, 2005, filed on November 23, 2005. (File No. 000-22194).

   (17) Previously filed with the Current Report on Form 8-K of SPSS Inc., dated
        January 16, 2006, filed on January 17, 2006. (File No. 000-22194)

   (18) Previously filed with the 2006 Proxy Statement of SPSS Inc., filed on
        March 28, 2006 (File No. 000-22194).

   (19) Previously filed with the Current Report on Form 8-K of SPSS Inc., dated
        January 3, 2007, filed on January 9, 2007

   (20) Previously filed with the Current Report on Form 8-K of SPSS Inc., dated
        February 8, 2007, filed on February 9, 2007


                                       76

<PAGE>

                                   SIGNATURES

     Pursuant to requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

                                        SPSS INC.

                                        By:          /s/ Jack Noonan
                                            ------------------------------------
                                                         Jack Noonan
                                            President and Chief Executive
                                                           Officer

Date:  March 2, 2007

     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 capacity and on the dates indicated.


<Table>
<Caption>
          SIGNATURE                                   TITLE                              DATE
          ---------                                   -----                              ----

<S>                              <C>                                                <C>


    /s/ Norman H. Nie                   Chairman of the Board of Directors          March 2, 2007
  ---------------------------
        Norman H. Nie

     /s/ Jack Noonan             President, Chief Executive Officer and Director    March 2, 2007
-----------------------------
         Jack Noonan

  /s/ Raymond H. Panza           Executive Vice President, Corporate Operations,    March 2, 2007
-----------------------------         Chief Financial Officer and Secretary
       Raymond H. Panza

   /s/ Marc D. Nelson                Vice President, Corporate Controller and       March 2, 2007
-----------------------------              Principal Accounting Officer
        Marc D. Nelson

/s/ Charles R. Whitchurch                            Director                       March 2, 2007
-----------------------------
    Charles R. Whitchurch

    /s/ Merritt Lutz                                 Director                       March 2, 2007
-----------------------------
         Merritt Lutz

    /s/ Michael Blair                                Director                       March 2, 2007
-----------------------------
        Michael Blair

  /s/ William B. Binch                               Director                       March 2, 2007
-----------------------------
       William B. Binch

  /s/ Kenneth H. Holec                               Director                       March 2, 2007
-----------------------------
       Kenneth H. Holec

  /s/ Michael E. Lavin                               Director                       March 2, 2007
-----------------------------
       Michael E. Lavin
</Table>




                                       77

<PAGE>

                                  EXHIBIT INDEX



<Table>
<Caption>
   EXHIBIT
   NUMBER                               DOCUMENT DESCRIPTION
   -------                              --------------------

<S>            <C>

21.1           Subsidiaries.
23.1           Consent of Grant Thornton LLP.
23.2           Consent of KPMG LLP.
31.1           Certification of the Chief Executive Officer and President pursuant to
               Section 302 of the Sarbanes-Oxley Act of 2002.
31.2           Certification of the Chief Financial Officer pursuant to Section 302
               of the Sarbanes-Oxley Act of 2002.
32.1           Certification of Chief Executive Officer and President pursuant to 18
               U.S.C. Section 1350, as adopted Pursuant to Section 906 of the
               Sarbanes-Oxley Act of 2002.
32.2           Certification of Chief Financial Officer pursuant to 18 U.S.C. Section
               1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
               2002.
</Table>




                                       78