UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

FORM 10-Q

(Mark One)

[X]            QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934



For the period ended June 30, 2001

OR

[   ]           TRANSITION REPORT PURSUANT TO SECTION 13 OR

15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______________ to ______________

Commission file number   0-16230

STRUCTURAL DYNAMICS RESEARCH CORPORATION

(Exact name of registrant as specified in its charter)



|Ohio                                                           |  |  |  |  |                                      |  |  | 31-0733928
|-------------------------------------------------------------- |  |  |  |  | ------------------------------------ |  |  | ----------
|(State or other jurisdiction of
incorporation or organization) |  |  |  |  | (I.R.S. Employer Identification No.)

2000 Eastman Drive, Milford, Ohio 45150

(Address of principal executive offices)

(Zip Code)

(513) 576-2400

(Registrant's telephone number, including area code)



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 [  ]

As of July 31, 2001 there were 36,837,090 shares of the Registrant's Common Stock, without par
value, issued and outstanding.

STRUCTURAL DYNAMICS RESEARCH CORPORATION

Form 10-Q for period ended June 30, 2001

Table of Contents

|PART I.   | FINANCIAL INFORMATION                                                                 | Page
|--------- | ------------------------------------------------------------------------------------- | ----
|Item 1.   | Financial Statements (Unaudited)                                                      |     
|          | Consolidated Statements of Operations and Comprehensive
Income                        | 1   
|          | Consolidated Balance Sheets                                                           | 2   
|          | Consolidated Statements of Cash Flows                                                 | 4   
|          | Notes to Consolidated Financial Statements                                            | 5   
|Item 2.   | Management's Discussion and Analysis of Financial Condition and
Results of Operations | 6   
|Item 3.   | Quantitative and Qualitative Disclosures About Market Risk                            | 13  
|          |                                                                                       |     
|PART II.  | OTHER INFORMATION                                                                     |     
|Item 4.   | Submission of Matters to a Vote of Shareholder Securities                             | 13  
|Item 6.   | Exhibits and Reports on Form 8-K                                                      | 13  
|          |                                                                                       |     
|SIGNATURE |                                                                                       | 26  

PART I.  FINANCIAL INFORMATION

Item 1.  Financial Statements.

STRUCTURAL DYNAMICS RESEARCH CORPORATION AND SUBSIDIARIES

Consolidated Statements of Operations and Comprehensive Income

(Unaudited)

(in thousands, except per share data)

|                                    |                | Three Months |   | Six Months  
|----------------------------------- | -------------- | ------------ | - | ------------
|Ended June 30,                      | Ended June 30,
|                                    |                | 2001         |   | 2000        
|Revenue:                            |                |              |   |             
|Software licenses                   | $              | 44,248       | $ | 43,915      
|Software maintenance and services   |                | 76,895       |   | 74,194      
|Total revenue                       |                | 121,143      |   | 118,109     
|                                    |                |              |   |             
|Cost of revenue:                    |                |              |   |             
|Cost of licenses                    |                | 6,881        |   | 7,873       
|Cost of maintenance and services    |                | 42,247       |   | 42,829      
|Total cost of revenue               |                | 49,128       |   | 50,702      
|Gross profit                        |                | 72,015       |   | 67,407      
|                                    |                |              |   |             
|Operating expenses:                 |                |              |   |             
|Selling and marketing               |                | 32,020       |   | 29,811      
|Research and development            |                | 23,529       |   | 22,506      
|General and administrative          |                | 5,622        |   | 5,096       
|In-process research and development |                | 250          |   | --          
|Total operating expenses            |                | 61,421       |   | 57,413      
|Operating income                    |                | 10,594       |   | 9,994       
|                                    |                |              |   |             
|Other income, net                   |                | 1,276        |   | 3,472       
|Income before income taxes          |                | 11,870       |   | 13,466      
|Income tax expense                  |                | 3,020        |   | 5,185       
|Net income                          | $              | 8,850

===== | $ | 8,281

=====
|                                    |                |              |   |             
|Net income per share:               |                |              |   |             
|Basic                               | $              | .25          | $ | .23         
|Diluted                             |                | .23          |   | .23         
|                                    |                |              |   |             
|Comprehensive income                | $              | 7,830

====  | $ | 7,593

==== 

See accompanying notes to consolidated financial statements.

STRUCTURAL DYNAMICS RESEARCH CORPORATION AND SUBSIDIARIES

Consolidated Balance Sheets

(in thousands)

|                                               |             | June 30,        | December 31,
|---------------------------------------------- | ----------- | --------------- | ------------
|                                               |             | 2001            |             
|Assets                                         | (unaudited) |                 |             
|                                               |             |                 |             
|Current assets:                                |             |                 |             
|Cash and cash equivalents                      | $           | 188,062         | $           
|Short-term investments                         |             | 4,329           |             
|Trade accounts receivable, net                 |             | 101,619         |             
|Other accounts receivable                      |             | 5,478           |             
|Prepaid expenses and other current assets      |             | 12,380          |             
|                                               |             | 311,868         |             
|                                               |             |                 |             
|Marketable securities                          |             | 686             |             
|                                               |             |                 |             
|Property and equipment, at cost:               |             |                 |             
|Computer and other equipment                   |             | 72,966          |             
|Office furniture and equipment                 |             | 22,078          |             
|Leasehold improvements                         |             | 10,481          |             
|                                               |             | 105,525         |             
|                                               |             |                 |             
|Less accumulated depreciation and amortization |             | 82,256          |             
|Net property and equipment                     |             | 23,269          |             
|                                               |             |                 |             
|Marketable software costs, net                 |             | 55,641          |             
|Goodwill and other intangibles                 |             | 10,101          |             
|Other assets                                   |             | 11,753          |             
|                                               |             |                 |             
|                                               |             |                 |             
|Total assets                                   | $           | 413,318

====== | $           

See accompanying notes to consolidated financial statements.

STRUCTURAL DYNAMICS RESEARCH CORPORATION AND SUBSIDIARIES

Consolidated Balance Sheets

(in thousands, except per share data)

|                                                 |             | June 30,        | December 31,
|------------------------------------------------ | ----------- | --------------- | ------------
|                                                 |             | 2001            |             
|Liabilities and Shareholders' Equity             | (unaudited) |                 |             
|                                                 |             |                 |             
|Current liabilities:                             |             |                 |             
|Accounts payable                                 | $           | 13,953          | $           
|Accrued expenses                                 |             | 51,718          |             
|Accrued income taxes                             |             | 4,253           |             
|Deferred revenue                                 |             | 88,852          |             
|Total current liabilities                        |             | 158,776         |             
|                                                 |             |                 |             
|Long-term liabilities                            |             | 7,808           |             
|                                                 |             |                 |             
|Shareholders' equity:                            |             |                 |             
|Common stock, stated value $.0069 per share      |             |                 |             
|Authorized 100,000 shares; outstanding shares-   |             |                
|36,698 and 35,445 net of 3,832 and 3,992 shares  |             |                
|in treasury                                      | 255         | 246            
|Capital in excess of stated value                |             | 139,075         |             
|Retained earnings                                |             | 117,696         |             
|Accumulated other comprehensive income (loss):   |             |                 |             
|Foreign currency translation loss                |             | (10,296)        |             
|Unrealized holding gain on marketable securities |             | 4               |             
|Accumulated other comprehensive loss             |             | (10,292)        |             
|Total shareholders' equity                       |             | 246,734         |             
|                                                 |             |                 |             
|                                                 |             |                 |             
|Total liabilities and shareholders' equity       | $           | 413,318

====== | $           



See accompanying notes to consolidated financial statements.

STRUCTURAL DYNAMICS RESEARCH CORPORATION AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(Unaudited)

(in thousands)

|                                                             | Six Months Ended June 30,
|------------------------------------------------------------ | -------------------------
|                                                             |                          
|Cash flows from operating activities:                        |                          
|Net Income                                                   | $                        
|Adjustments to reconcile net income to net cash flows        |                          
|from operating activities:                                   |                          
|Amortization of computer software cost                       |                          
|Depreciation                                                 |                          
|Stock contributions to 401(k) plan                           |                          
|Amortization of goodwill and acquired intangibles            |                          
|In-process research and development                          |                          
|Loss on sale of property and divestitures                    |                          
|Deferred income tax (benefit) expense                        |                          
|Other                                                        |                          
|Changes in assets and liabilities from operating activities: |                          
|Accounts receivable                                          |                          
|Prepaid expenses and other assets                            |                          
|Accounts payable and accrued expenses                        |                          
|Deferred revenue                                             |                          
|Other long-term liabilities                                  |                          
|Income taxes                                                 |                          
|Net cash provided by operating activities                    |                          
|                                                             |                          
|Cash flows from investing activities:                        |                          
|Sales (purchases) of marketable securities, net              |                          
|Additions to property and equipment, net                     |                          
|Additions to marketable software costs                       |                          
|Acquisition of Sherpa, net of cash acquired                  |                          
|Acquisition of Inovie, net of cash acquired                  |                          
|Other                                                        |                          
|Net cash (used) in investing activities                      |                          
|                                                             |                          
|Cash flows from financing activities:                        |                          
|Issuance of common stock                                     |                          
|Net cash provided by financing activities                    |                          
|                                                             |                          
|Effect of exchange rate changes on cash                      |                          
|Increase in cash and cash equivalents                        |                          
|                                                             |                          
|Cash and cash equivalents:                                   |                          
|Beginning of period                                          |                          
|End of period                                                | $                        

See accompanying notes to consolidated financial statements.



STRUCTURAL DYNAMICS RESEARCH CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Unaudited)

(in thousands, except per share data)

(1)  Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared by SDRC
pursuant to the rules and regulations of the Securities and Exchange Commission.  As permitted
by the rules of the Securities and Exchange Commission applicable to quarterly reports on Form
10-Q, these notes are condensed and do not contain all disclosures required by generally accepted
accounting principles.  In the opinion of management, these financial statements contain all
adjustments (consisting of only normal recurring adjustments, unless otherwise noted) necessary
to present fairly SDRC's financial position, results of operations and cash flows as of the dates
and for the periods indicated.  These financial statements should be read in conjunction with the
Consolidated Financial Statements and related notes included in SDRC's Annual Report on Form
10-K for the year ended December 31, 2000.

(2)  Earnings Per Share

Basic and diluted earnings per common share are computed using the weighted average number
of common and dilutive common equivalent shares outstanding during the period, respectively.
Dilutive common equivalent shares are calculated using the treasury stock method and consist of
dilutive stock option grants.

The reconciliations of amounts used for the basic and diluted earnings per share calculations are
as follows:

|                                        |                | Three Months  |   | Six Months   
|--------------------------------------- | -------------- | ------------- | - | -------------
|Ended June 30,                          | Ended June 30,
|                                        |                | 2001          |   | 2000         
|                                        |                |               |   |              
|Net income (numerator)                  | $              | 8,850

====   | $ | 8,281

====  
|                                        |                |               |   |              
|Weighted average outstanding:           |                |               |   |              
|Common shares (basic denominator)       |                | 36,085        |   | 36,057       
|Dilutive employee stock options         |                | 2,771         |   | 636          
|                                        |                |               |   |              
|Common stock and dilutive common        |                |               |   |              
|stock equivalents (diluted denominator) |                | 38,856

===== |   | 36,693

=====
|                                        |                |               |   |              
|Earnings per share:                     |                |               |   |              
|Basic                                   | $              | .25           | $ | .23          
|Diluted                                 | $              | .23           | $ | .23          

Options to purchase 297 and 1,455 shares of common stock for the three and six month periods
ended June 30, 2001 and 2,739 and 2,348 shares of common stock for the three and six month
periods ended June 30, 2000 respectively, were not included in the computation of dilutive
earnings per share because the options' exercise price was greater than the average market price
of common shares.

(3)  Inovie Acquisition



In April 2001, SDRC acquired all the stock of Inovie(R) Software, Inc. ("Inovie"), a developer of
web-based collaborative project management software.  SDRC paid approximately $6,000 in
cash.  The transaction was recorded as a purchase and beginning in April 2001, the operating
results of Inovie were included in SDRC's operating results.  SDRC will couple Inovie's project
management software with SDRC's product management solutions.  Additionally, Inovie's
products will continue to be offered separately and sold to a variety of non-manufacturing
industries and end-user applications.

(4)  Agreement and Plan of Merger

On May 23, 2001, SDRC entered into an Agreement and Plan of Merger with Electronic Data
Systems Corporation ("EDS") and Emerald Acquisition Corporation I ("Emerald"), a wholly
owed subsidiary of EDS.  If the transaction is completed, SDRC would merge into Emerald and
become a wholly owned subsidiary of EDS.  The acquisition is subject to several conditions,
including regulatory approvals and the approval of SDRC's shareholders.  Each outstanding share
of SDRC common stock would be cancelled and converted into a right to receive cash of $25.
The purchase price would be approximately $920,000.  The transaction is intended to close by
September 30, 2001.  Once completed, EDS plans to consolidate SDRC with Unigraphics
Solutions Inc., another subsidiary of EDS.

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.

(in thousands)

Certain statements in this Form 10-Q are forward looking statements that involve risks and
uncertainties, including the timely availability and acceptance of new products, the impact of
competitive products and pricing, the management of growth, and the other risks detailed from
time to time in SDRC's Securities and Exchange Commission reports.  SDRC's results could
differ from those results described herein.  Forward looking information should be evaluated in
the context of these and other factors, some of which are described in more detail in "Factors
That May Affect Future Results".

SDRC is a leading developer and global provider of software solutions for collaborative product
development.  Customers use SDRC's mechanical design automation ("MDA") and product
knowledge management ("PKM") software solutions to develop mechanical products and
manage information about their products.  The I-DEAS(R) and Metaphase(R) solution suites are
SDRC's primary MDA and PKM product brands, respectively.  SDRC's software solutions
facilitate innovation through collaboration, enabling customers to optimize product development
early in the design process, increase productivity and significantly improve time-to-market.
SDRC's software solutions maximize the efficiency of the design process, allowing product-related information to be distributed throughout the enterprise.  These solutions are most valuable
to companies seeking to accelerate their time to market for new products in response to increased
competition.  Complementing its software solutions, SDRC supports its customers with training,
software implementation, consulting and hotline services.  SDRC has a worldwide professional
services staff with extensive knowledge of information management, mechanical design
technology and development processes.

On May 23, 2001, SDRC entered into an Agreement and Plan of Merger with Electronic Data
Systems Corporation ("EDS") and Emerald Acquisition Corporation I ("Emerald"), a wholly
owed subsidiary of EDS.  If the transaction is completed, SDRC would merge into Emerald and
become a wholly owned subsidiary of EDS.  The acquisition is subject to several conditions,
including regulatory approvals and the approval of SDRC's shareholders.  Each outstanding share
of SDRC common stock would be cancelled and converted into a right to receive cash of $25.
The purchase price would be approximately $920,000.  The transaction is intended to close by
September 30, 2001.  Once completed, EDS plans to consolidate SDRC with Unigraphics
Solutions Inc., another subsidiary of EDS.

Revenue

Total revenues grew 3% for the three and six month periods ended June 30, 2001 compared to
the corresponding periods of 2000.  Revenue growth was lead by Metaphase licenses and
services revenues.  Total revenues from Metaphase and other PKM related products grew 23%
during the first six months of 2001 compared to the same period in 2000.  PKM accounted for
39% of total revenues during the first six months of 2001 compared to 33% during the first six
months of last year.  Metaphase licenses revenues grew 46% and 45% compared to the previous
year periods, to $16,476 and $33,791 for the three and six months ended June 30, 2001.
Metaphase license growth during the second quarter was driven by approximately twenty-five
license orders over one hundred thousand dollars each.  Total license revenues during the three
and six months ended June 30, 2001 grew 1% and 4% as growing Metaphase sales were partially
offset by declining MDA sales.  MDA license sales declined due to lower spending primarily
within the automotive industry.  Total maintenance and services revenue grew 4% during the
quarter ended June 30, 2001 and was relatively flat for the six months then ended when
compared to the same periods of 2000.  Metaphase maintenance and services revenues grew 12%
and 13% during the 2001 periods compared to last year.  MDA maintenance revenue growth
remained solid while MDA service revenues declined as billable resources were deployed onto
Metaphase service contracts.

For the six month periods ended June 30, 2001 and 2000, revenue in North America accounted
for 42% and 43%, Europe 32% and 35%, and Asia Pacific 26% and 22% respectively, of
consolidated net revenues.  Asia Pacific's revenue growth in 2001 was due to large license orders
from two major automotive industry customers.  SDRC expects the international market to
continue to account for a significant portion of total future revenue.

Cost of Revenue

Cost of revenue consists principally of the staff and related costs associated with fee based
services and support for software maintenance contracts; amortization of goodwill, acquired
intangibles and capitalized software costs; royalty fees paid to third parties under licensing
agreements and the cost of distributing software products.  The total cost of revenue was $49,128
and $97,742 for the three and six month periods ended June 30, 2001, respectively compared to
$50,702 and $100,724 for the corresponding periods in 2000.

The cost of licenses, as a percentage of license revenue was 16% for the three and six month
periods ended June 30, 2001, compared to 18% and 19% for the corresponding periods in 2000.
The cost of licenses decreased 13% and 12% for the three and six month periods ended June 30,
2001, compared to the same periods in 2000.  The primary reason for the decline in license costs
was a reduction in amortization of goodwill and other acquired intangibles.   The reduction in
amortization is the result of an impairment charge recorded in December 2000 to write-down
goodwill and other intangibles to their fair values.  Third party royalty fees also declined while
software amortization expense increased during the first six months of 2001 due to the release of
I-DEAS 8.

The cost of maintenance and services declined 1% during the three and six month periods ended
June 30, 2001 compared to the same periods in 2000.  The cost of services and maintenance, as a
percentage of related revenue was 55% and 57% for the three and six month periods ended June
30, 2001 compared to 58% and 59% for the corresponding periods in 2000.    Lower amortization
expense, cost controls, and the successful transition of resources to Metaphase service projects
resulted in lower expenses compared to 2000.



Selling and Marketing Expenses

Selling and marketing expenses consist primarily of the compensation, travel and facility costs
associated with the worldwide sales and marketing staff, advertising expenses and product
localization.  Selling and marketing expenses represented 26% of revenue for the three and six
month periods ended June 30, 2001 respectively, compared to 25% and 26% during the
corresponding 2000 periods.  These expenses increased 7% and 6% during the three and six
month periods ended June 30, 2001 compared to the corresponding periods in 2000.  The
increase is due to incremental salaries and sales commissions associated with the increase in
Metaphase revenues during 2001.  Additionally, during the second quarter of 2001, SDRC
conducted an industry symposium for collaborative development technologies.

Research and Development Expenses

Research and development expenses consist primarily of salaries, benefits, computer equipment
and facilities cost associated with the product development staff.  They exclude costs which are
capitalized in accordance with Statement of Financial Accounting Standards No. 86, Accounting
for the Costs of Computer Software to be Sold, Leased, or Otherwise Marketed.  Research and
development expenses increased 5% and 11% for the three and six month periods ended June 30,
2001 compared to the three and six month periods ended June 30, 2000.  During the three and six
months ended June 30, 2001, SDRC capitalized $4,053 and $8,042 of software development
cost, while in the corresponding 2000 periods $3,148 and $9,384 of cost were capitalized.  Total
software development cost, including research expenses and capitalized amounts, was $27,582
and $54,324 for the three and six months ended June 30, 2001 compared to $25,654 and $51,030
for the corresponding 2000 periods.  The increases in 2001 were mainly due to incremental salary
cost and external contractor fees for PKM product development.  The amount of capitalized
software development cost and accordingly, research and development expenses, may vary
among periods depending on the stage of development being performed on future product
releases.

General and Administrative Expenses

General and administrative expenses consist of costs associated with the executive, finance,
legal, human resource and corporate administrative staffs.  General and administrative expenses
represented 5% of revenue for the three and six month periods ended June 30, 2001 and 4% of
revenue for the three and six months ended June 30, 2000.  General and administrative expenses
increased to $5,622 and $11,583 for three and six months ended June 30, 2001 respectively,
compared to $5,096 and $9,842 for the corresponding 2000 periods.  Additional staffing and
compensation costs accounted for the increase.

Other Income, net

Other income for the three and six month periods ended June 30, 2001 was $1,276 and $3,034
and consisted primarily of interest income from cash equivalents and marketable securities.  For
the three and six months ended June 30, 2000, other income was $3,472 and $4,185 and
primarily reflects interest income.  In addition to interest income, other income in the second
quarter of 2000 reflects a net gain of approximately $969 associated with the settlement of a lease
obligation for an unoccupied building in the United Kingdom.  Also, during the first quarter of
2000, other income included a charge of approximately $1,400 for the divestiture of SDRC's
Advanced Test & Analysis operations.  Other income also includes foreign currency transaction
losses which were larger in 2001 compared to 2000.

Income Taxes

Income tax expense was $3,020 and $4,961 for the three and six months ended June 30, 2001
and $5,185 and $7,900 for 2000 respectively.  The effective income tax rate for the three and six
months ended June 30, 2001, was 25% compared to 39% and 38% for the corresponding 2000
periods.  SDRC's best estimate of the effective income tax rate throughout 2001 is approximately
25%.  The decrease in the effective income tax rate is due to the renegotiation of several Asian
distributorship agreements regarding the characterization of SDRC products and the manner in
which they are packaged, delivered and sold.  A decrease in non-deductible goodwill
amortization due to the impairment write-downs of goodwill and intangible assets associated
with several previous acquisitions in December 2000 also decreases the effective tax rate for
2001.  As of June 30, 2001, SDRC has a valuation allowance of approximately $34,000
established against deferred tax assets.  SDRC will evaluate and adjust its estimated global
effective tax rate as appropriate based on changes in its global businesses.

Comprehensive Income

The differences between net income and comprehensive income were primarily due to unrealized
gains and losses from the translation of foreign subsidiaries' balance sheets into U.S. dollars.
Larger net foreign currency translation losses occurred in 2001 compared to 2000 because the
U.S. dollar strengthened against the foreign currencies of subsidiaries.

Acquisition of Inovie

In April 2001, SDRC acquired all the stock of Inovie(R) Software, Inc. ("Inovie"), a developer of
web-based collaborative project management software.  SDRC paid approximately $6,000 in
cash.  The transaction was recorded as a purchase and beginning in April 2001, the operating
results of Inovie were included in SDRC's operating results.  SDRC plans to couple Inovie's
project management software with SDRC's product management solutions.  Additionally,
Inovie's products will continue to be offered separately and sold to a variety of non-manufacturing industries and end-user applications.

Liquidity and Capital Resources

As of June 30, 2001, SDRC had $193,077 in cash, cash equivalents and marketable securities
compared to $160,753 as of December 31, 2000.  During the six months ended June 30, 2001,
SDRC generated $44,883 of cash from operating activities.  During the same period of 2000,
SDRC generated $37,272 of cash from operations.  The increase in the amount of operating cash
generated between the 2001 and 2000 periods was primarily due to aggressive receivable
collections offset by an additional month's payroll in 2001 due to a change in the timing of the
U.S. payroll date.

SDRC used $4,824 and $23,312 of cash for investing activities during the six month periods
ended June 30, 2001 and 2000.  During 2001, maturities and sales of SDRC's marketable
securities resulted in significant cash in-flows compared to the previous year.  The proceeds were
offset by cash used for acquisitions, equipment purchases and capitalized software during 2001.

Cash from financing activities increased due to significant exercises of employee stock options
during the second quarter of 2001.

SDRC's sources of liquidity and funds anticipated to be generated from operations are expected
to be adequate for SDRC's cash requirements in the foreseeable future.  SDRC does not have any
significant commitments for material capital expenditures.  SDRC has never paid a cash dividend
and does not expect to do so.



Factors That May Affect Future Results

The historical results of operations and financial position of SDRC are not necessarily indicative
of future financial performance.  SDRC's results and forward-looking statements are subject to
certain risks and uncertainties, including but not limited to those discussed below that could
cause future results to differ materially from those projected.  Forward-looking statements
included in this report should be evaluated in the context of these risk factors and uncertainties.

Agreement and Plan of Merger

While the acquisition of SDRC by EDS remains pending, SDRC may face various operating
disruptions.

-   Customers may choose to delay purchasing decisions if they have concerns about future
product development and support.

-   Sales execution may be hindered by lack of focus on certain major accounts.

-   Distributors and resellers may shift their offerings if they have concerns about continual
product support.

-   Due to employment uncertainties, key employees may choose to voluntarily terminate in favor
of other career opportunities.

-   Relationships with third party developers may be disrupted, resulting in product delays.

If completion of the transaction takes more time than expected, or if the agreement is terminated,
operating results may be negatively impacted.  Completion of the acquisition depends on
regulatory approvals, SDRC shareholder approval and other conditions as specified in the
acquisition agreements.  If, under certain conditions, the agreement is not completed, SDRC
would be required to pay EDS a termination fee of $30,000, plus certain expenses and other fees.
If the agreement is not completed, the trading price of SDRC's shares would likely decline
significantly.

Product Development

SDRC has embarked on a strategy to expand its product line for visualization features, data

exchange functionality, Internet operable design and expedient Metaphase implementation tools.
The markets for these initiatives, and the entire collaborative product development industry, are
highly competitive and characterized by rapid technological change, shifting customer needs and
continual innovation.  SDRC's success is dependent on its ability to anticipate user needs and to
keep pace with new technological developments which customers need.  SDRC and its
competitors are spending significant resources to develop Internet-based collaboration tools.  The
speed and degree that SDRC can develop and market Internet-operable data exchange and other
e-business features and its other product lines, will affect future operating results.

SDRC has committed to providing certain enhancements and integrations to customers within
aggressive time frames.  Failure to meet these time frames could result in delayed or lost revenue
opportunities.  SDRC relies on highly skilled technical and other key employees who are
competitively recruited within the software industry.  Additionally, SDRC relies, to a lesser
degree, on third parties for development.  Failure to attract and retain key personnel and maintain
strategic third party relationships could have an adverse impact on future operating results.

Sales Execution

SDRC's sales approach emphasizes enterprise-wide collaboration solutions, which include
software licenses, support and consulting services, primarily to large customer accounts.
Enterprise solution sales are complex and the sales process and approval cycles can be lengthy.
Historically, a significant portion of SDRC's revenue is generated from shipments in the last
month of a quarter.  Failure to close a few large orders in a particular quarter may negatively
impact operating results.  In addition, higher volumes of orders have been experienced in the
fourth quarter.  The concentration of orders toward the end of the period makes projections of
quarterly financial results difficult.  SDRC usually ships software licenses within one to two
weeks after receipt of a customer order.  Orders may exist at the end of a quarter, which have not
been shipped; however, the value of such orders is not indicative of revenue results for any future
period.

SDRC sells its products through a common direct sales force.  Enterprise solution selling
requires persistent effort and active sales management.  Accordingly, organizational execution,
sales force training and related issues could hinder the sales force's ability to secure customer
accounts to the extent planned.  Besides its own sales force, SDRC continues to rely on
distributors, representatives and value-added resellers to sell a significant portion of its software
licenses.  Changes with a distributor, representative or value-added reseller, or disruptions in the
internal sales organization could have a significant impact on operating results in a quarter.

Product Markets

SDRC derives most of its revenue from selling software products and services into large-scale
mechanical design environments.  The mechanical design market is maturing and the perception
of product differentiation has declined.  Large, multi-national manufacturing companies have
made significant investments in enterprise-wide MDA systems.  Due to the significant cost of
switching systems, it is difficult to replace existing installations of competitors' systems.  SDRC
also faces competition from mid-priced, Windows based, MDA applications, which are
increasingly providing advanced product functionality and flexibility.  SDRC is developing
collaboration tools that utilize the Internet as a medium of information exchange.  Manufacturers
and their partners may not adopt the Internet for product data exchange to the degree or at the rate
that SDRC expects.

SDRC faces exposure to market conditions in several industries including the automotive and
aerospace and defense industries.  A slow down in these or other industries could result in
reduced revenues.  Additionally, if collaborative MDA and PKM license revenues are less than
expected, maintenance and services revenue growth are also likely to be less than planned.
SDRC's ability to match resource levels with revenue levels, will directly impact its future
operating results.  SDRC's operating expense levels are planned, in part, on forecasted revenue,
and expense levels are generally committed in advance.  Since expenses are relatively fixed in
the near term, future operating results will be impacted by SDRC's ability to convert invested
outlays into expected revenue at profitable margins.

Technology Investment

SDRC capitalizes substantial amounts of internal development costs associated with each MDA
software release.  Additionally, SDRC may acquire technologies deemed to have strategic
benefit.  The effect on future earnings will depend, in part, on SDRC's ability to fully utilize and
integrate the purchased technology and market it to SDRC's customers.  Market growth and sales
expansion must be sufficient to cover the fixed cost structure including software and intangible
amortization or operating results will be negatively impacted.  Significant delays in software
development of new or enhanced products could increase sales competition and hinder future
sales and operating results.  If revenue results are less than planned, SDRC's ability to recover the
carrying value of an intangible may be impaired.  Under such circumstances, SDRC will review
the operating results and expected cash flows associated with the related intangible.  If the fair
value of the intangible is less than the carrying value, an impairment charge will be recorded
against net operating income in the period the impairment is determined.

International Business

A significant portion of SDRC's revenue is from international markets.  As a result, SDRC's
financial results could be impacted by weakened general economic conditions, differing
technological advances or preferences, volatile foreign exchange rates and government trade
restrictions in any country in which SDRC does business.  SDRC has invested sizable resources
in the Asia-Pacific region, particularly in Japan and South Korea.  Economic instability in this
region could lead to an adverse impact on SDRC's operating results and financial position.

Item 3.  Quantitative and Qualitative Disclosures about Market Risk.

There have not been any significant changes to SDRC's financial market risk exposure since the
filing of the 2000 Annual Report on Form 10-K.

Item 4.   Submission of Matters to a Vote of Security Holders.

At the May 3, 2001 Annual Meeting of Shareholders, the Company's shareholders voted to:

Elect the following Class II directors to serve until the 2003 Annual Meeting as follows:

William J. Weyand - 33,649,117 shares in favor; 259,438 shares against.

Mitchell G. Tyson - 33,692,399 shares in favor; 216,156 shares against.

Gilbert R. Whitaker, Jr. - 33,684,290 shares in favor; 224,265 against.

There were no broker non-votes.

Ratify the appointment of PricewaterhouseCoopers LLP as the independent accountants of the
Company for 2001.  Shares totaling 33,772,709 voted in favor, 117,774 voted against and 18,072
abstained with no broker non-votes.

PART II.  OTHER INFORMATION

Item 6.  Exhibits and Reports on Form 8-K.

|a) | Exhibits           
|-- | -------------------
|   | 2.                 
|   | 10.                
|  
|b) | Report on Form 8-K.
|   |                    

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

|      |                 |  |  | STRUCTURAL DYNAMICS RESEARCH CORPORATION
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|Date: | August 14, 2001 |  |  | By:                                     
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