| Filed by Inet Technologies, Inc. Subject Company: Inet Technologies, Inc. Pursuant to Rule 425 under the Securities Act of 1933 and deemed filed pursuant to Rule 14a-12 under the Securities Exchange Act of 1934 Registration No.: 333-117454 | ||||
| FOR MORE INFORMATION, CONTACT: Ms. Kelly Love, CFA Director of Investor Relations Inet Technologies, Inc. (469) 330-4171 |
INET TECHNOLOGIES REPORTS SECOND QUARTER 2004 FINANCIAL RESULTS
Total Revenues Increase 13 Percent Year-over-Year
Richardson, Texas—July 20, 2004—Inet Technologies, Inc. (NASDAQ: INET), a leading global provider of communications software products that enable communications carriers to more strategically and profitably operate their businesses, today reported financial results for its second quarter ended June 30, 2004.
Revenues for the three months ended June 30, 2004 were $28.7 million versus revenues of $25.5 million in the second quarter of 2003 and $27.2 million in the first quarter of 2004. On a GAAP basis, the Company reported net income of $1.8 million, or $0.05 per diluted share, for the second quarter of 2004, compared to net income of $2.3 million, or $0.06 per diluted share, for the second quarter of 2003 and net income of $3.3 million, or $0.08 per diluted share, for the first quarter of 2004. Pro forma net income for the three months ended June 30, 2004—which specifically excludes approximately $2.2 million of merger-related transaction expenses—was $4.0 million, or $0.10 per diluted share. For a detailed comparison of pro forma and GAAP results, please refer to the reconciliation table at the bottom of this press release.
For the six months ended June 30, 2004, revenues were $55.9 million compared to $50.5 million for the same period of the prior year. On a GAAP basis, the Company reported net income of $5.1 million, or $0.13 per diluted share, for the six months ended June 30, 2004, compared to net income of $5.5 million, or $0.14 per diluted share, for the same prior-year period. Pro forma net income for the six months ended June 30, 2004—which specifically excludes approximately $2.2 million of merger-related transaction expenses—was $7.3 million, or $0.18 per diluted share. On June 29, 2004, a joint press release was issued announcing the acquisition of Inet by Tektronix, Inc. The acquisition, which has been approved by both companies' Boards of Directors, is subject to customary closing conditions, including Inet stockholder approval and certain regulatory approvals. The acquisition is expected to close on approximately September 30, 2004.
"We continue to see very strong interest in our products, especially in the mobile data market," said Elie Akilian, president and chief executive officer of Inet. "Because of the successful rollout by carriers of mobile data services and continued subscriber growth, we are already experiencing solid expansion business with our existing mobile data customers. In addition to GPRS, certain mobile carriers are beginning to accelerate the deployment of UMTS. Our success to date in the GPRS market positions us well to seize these follow-on opportunities. We also continue to compete for new mobile data accounts and expect decisions from a number of carriers over the coming weeks."
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"We are very pleased with our results for the quarter and the continued momentum we are experiencing in our markets," said Jeff Kupp, vice president and chief financial officer of Inet. "Second quarter revenues increased 13 percent over the prior year and gross margins of 69 percent were near the high end of the range that we expected. On a pro forma basis, operating margins for the second quarter were 17 percent—also at the high end of our range of expectations. Our combined cash and short-term investments balance grew and days sales outstanding fell to 34 days. We are excited to see growth in our business as we execute our strategy."
Second Quarter Operational Highlights
"Our second quarter order activity included solid GPRS and UMTS business," continued Mr. Akilian. "While we are excited about the momentum, in both order and pipeline activity, of next-generation technologies, we continue to see good order levels from our fixed-line customers for system expansions as well as our service assurance and revenue assurance applications. In terms of second quarter revenues, we completed installations for numerous carriers in Europe and Asia/Pacific for our Interconnection Voice Assurance™ and Interconnection Mobility Assurance™ applications that are part of our Orion™ service assurance product. We also completed a large installation for a fixed-line carrier in the United States for VoIP and one of our revenue assurance applications. Diagnostics revenues continue to increase which, we believe, is a positive sign for the rollout of next-generation networks."
Financial Guidance
Given the pending acquisition announcement, the Company is not issuing forward-looking financial guidance.
About Inet Technologies, Inc.
Founded in 1989, Inet Technologies is a global provider of communications software products that enable communications carriers to more strategically and profitably operate their businesses. Our Unified Assurance Solution and our Diagnostics products help our customers reduce capital and operating expenditures, improve customer acquisition and retention rates, protect and grow revenues, and more quickly and effectively develop products or services. Using our Unified Assurance Solution products, communications carriers are able to simultaneously manage their voice and data services at the network, service and customer layers to detect network and service problems in real time, enabling proactive identification of specific customers impacted by network or service issues. Our Diagnostics products assist communications carriers and equipment manufacturers in quickly and cost-effectively designing, deploying and maintaining current- and next-generation networks and network elements. Inet is headquartered in Richardson, Texas and has approximately 497 employees worldwide. Inet is an ISO 9001 registered company. For more information, visit Inet on the Web atwww.inet.com.
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Additional Information About the Acquisition and Where to Find It
Tektronix and Inet have filed with the Securities and Exchange Commission ("SEC") a Registration Statement on Form S-4, which contains a proxy statement/prospectus with respect to the acquisition and other relevant materials. WE URGE INET STOCKHOLDERS AND INVESTORS TO READ THE PROXY STATEMENT/PROSPECTUS BECAUSE IT CONTAINS IMPORTANT INFORMATION ABOUT TEKTRONIX, INET AND THE ACQUISITION. The proxy statement/prospectus, including the annexes attached to, and the reports incorporated by reference in, the proxy statement/prospectus, and any other reports and documents filed by Tektronix or Inet with the SEC, may be obtained free of charge at the SEC's web site at www.sec.gov.
Investors and security holders may obtain copies of all documents filed with the SEC relating to the acquisition, free of charge, at the SEC's web site (www.sec.gov). Investors and security holders may also obtain these documents free of charge from Tektronix at the Investor Relations link on Tektronix's web site at www.tektronix.com or by contacting Tektronix's Investor Relations at (503) 627-5614. Documents are also available at the link entitled SEC filings in the Investor Relations section of Inet's web site, www.inet.com, or by contacting Inet's Investor Relations at (469) 330-4171.
Tektronix and Inet and their respective directors and executive officers may be deemed participants in the solicitation of proxies from security holders in connection with this transaction. Information about the directors and executive officers of Tektronix and Inet and information about other persons who may be deemed participants in this transaction is included in the proxy statement/prospectus. You can find information about Tektronix's executive officers and directors in Tektronix's proxy statement (DEF14A) filed with the SEC on August 21, 2003. You can find information about Inet's officers and directors in their proxy statement (DEF14A) filed with the SEC on April 9, 2004. You can obtain free copies of these documents from the SEC or from Tektronix and Inet using the contact information above. In addition, directors and executive officers of Inet may have direct or indirect interests in the acquisition due to securities holdings, pre-existing or future indemnification arrangements, vesting of options, or rights to severance payments if their employment is terminated following the acquisition. Additional information regarding Tektronix, Inet, and the interests of their respective executive officers and directors in the merger is contained in the proxy statement/prospectus.
We urge Inet's stockholders to read the proxy statement/prospectus, including the annexes attached to, and the reports incorporated by reference in, the proxy statement/prospectus, and any future report and document filed with the SEC by Tektronix and Inet, before making any voting or investment decision with respect to the acquisition.
This release contains forward-looking statements, including statements regarding our business prospects and the anticipated results of some of our product and operating strategies. Such forward-looking statements involve risks and uncertainties. Among the important factors that could cause actual results to differ materially from those in the forward-looking statements are the failure of or a significant delay in the consummation of the acquisition of Inet by Tektronix, any general economic slowdown, any slowdown in telecommunications spending, consolidations or bankruptcies involving our current or prospective customers, unforeseen changes in anticipated expenses or revenues, delays in implementation of our products, increased competition, any reduction in demand for our products and solutions and other factors detailed in Inet's filings with the Securities and Exchange Commission, including our Quarterly Report on Form 10-Q filed with the SEC on April 22, 2004.
Inet Technologies, Beamer, Spectra2, Orion, Interconnection Voice Assurance, Interconnection Mobility Assurance and Unified Assurance are trademarks of Inet Technologies, Inc. All other trademarks or registered trademarks belong to their respective owners.
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INET TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands, except share data)
| | June 30, 2004 | December 31, 2003 | |||||||
|---|---|---|---|---|---|---|---|---|---|
| ASSETS | |||||||||
| Current assets: | |||||||||
| Cash and cash equivalents | $ | 53,784 | $ | 118,527 | |||||
| Short-term investments | 119,594 | 55,034 | |||||||
| Trade accounts receivable, net | 10,167 | 10,870 | |||||||
| Unbilled receivables | 459 | 146 | |||||||
| Inventories | 9,211 | 7,924 | |||||||
| Deferred income taxes | 1,915 | 1,628 | |||||||
| Other current assets | 7,237 | 5,055 | |||||||
| Total current assets | 202,367 | 199,184 | |||||||
| Property and equipment, net | 11,100 | 11,330 | |||||||
| Deferred income taxes | 324 | 217 | |||||||
| Other assets | 614 | 613 | |||||||
| Total assets | $ | 214,405 | $ | 211,344 | |||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||||
| Current liabilities: | |||||||||
| Accounts payable | $ | 2,346 | $ | 1,919 | |||||
| Income taxes payable | 2,318 | 2,408 | |||||||
| Accrued compensation and benefits | 3,782 | 4,115 | |||||||
| Deferred revenues | 14,868 | 21,554 | |||||||
| Other accrued liabilities | 5,957 | 3,724 | |||||||
| Total current liabilities | 29,271 | 33,720 | |||||||
| Commitments and contingencies | |||||||||
| Stockholders' equity: | |||||||||
| Common stock | 47 | 47 | |||||||
| Additional paid-in capital | 78,530 | 77,866 | |||||||
| Unearned compensation | (2,236 | ) | (2,610 | ) | |||||
| Retained earnings | 140,025 | 134,932 | |||||||
| Treasury stock | (31,232 | ) | (32,611 | ) | |||||
| Total stockholders' equity | 185,134 | 177,624 | |||||||
| Total liabilities and stockholders' equity | $ | 214,405 | $ | 211,344 | |||||
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INET TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In thousands, except per share data)
| | Three months ended June 30, | Six months ended June 30, | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | 2004 | 2003 | 2004 | 2003 | ||||||||||||
| Revenues: | ||||||||||||||||
| Product and license fees | $ | 20,519 | $ | 17,770 | $ | 40,166 | $ | 35,288 | ||||||||
| Services | 8,171 | 7,702 | 15,736 | 15,226 | ||||||||||||
| Total revenues | 28,690 | 25,472 | 55,902 | 50,514 | ||||||||||||
| Cost of revenues: | ||||||||||||||||
| Product and license fees | 5,567 | 6,336 | 10,794 | 9,238 | ||||||||||||
| Services | 3,236 | 3,303 | 6,424 | 7,470 | ||||||||||||
| Total cost of revenues | 8,803 | 9,639 | 17,218 | 16,708 | ||||||||||||
| Gross profit | 19,887 | 15,833 | 38,684 | 33,806 | ||||||||||||
| Operating expenses: | ||||||||||||||||
| Research and development | 7,737 | 7,257 | 15,863 | 14,942 | ||||||||||||
| Sales and marketing | 4,939 | 3,608 | 9,246 | 7,123 | ||||||||||||
| General and administrative | 4,565 | 2,061 | 6,826 | 4,480 | ||||||||||||
| 17,241 | 12,926 | 31,935 | 26,545 | |||||||||||||
| Income from operations | 2,646 | 2,907 | 6,749 | 7,261 | ||||||||||||
| Other income (expense): | ||||||||||||||||
| Interest income | 416 | 372 | 785 | 798 | ||||||||||||
| Other income (expense) | (243 | ) | (125 | ) | (398 | ) | (109 | ) | ||||||||
| 173 | 247 | 387 | 689 | |||||||||||||
| Income before provision for income taxes | 2,819 | 3,154 | 7,136 | 7,950 | ||||||||||||
| Provision for income taxes | 1,002 | 883 | 2,043 | 2,424 | ||||||||||||
| Net income | $ | 1,817 | $ | 2,271 | $ | 5,093 | $ | 5,526 | ||||||||
| Earnings per common share: | ||||||||||||||||
| Basic | $ | 0.05 | $ | 0.06 | $ | 0.13 | $ | 0.14 | ||||||||
| Diluted | $ | 0.05 | $ | 0.06 | $ | 0.13 | $ | 0.14 | ||||||||
| Weighted-average shares outstanding: | ||||||||||||||||
| Basic | 39,221 | 38,400 | 39,170 | 39,392 | ||||||||||||
| Diluted | 39,672 | 38,689 | 39,739 | 39,609 | ||||||||||||
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INET TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
| | Six months ended June 30, | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| | 2004 | 2003 | |||||||
| Cash flows from operating activities: | |||||||||
| Net income | $ | 5,093 | $ | 5,526 | |||||
| Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||
| Depreciation | 2,776 | 3,577 | |||||||
| Amortization of purchase discounts on investments | (484 | ) | — | ||||||
| Stock compensation | 374 | 171 | |||||||
| Deferred income taxes | (394 | ) | — | ||||||
| Changes in operating assets and liabilities: | |||||||||
| (Increase) decrease in trade accounts receivable | 703 | (3,449 | ) | ||||||
| Increase in unbilled receivables | (313 | ) | (197 | ) | |||||
| (Increase) decrease in inventories | (1,287 | ) | 689 | ||||||
| Increase in other assets | (2,183 | ) | (1,297 | ) | |||||
| Increase in accounts payable | 427 | 1,638 | |||||||
| Increase in taxes payable | 346 | 582 | |||||||
| Decrease in accrued compensation and benefits | (333 | ) | (1,152 | ) | |||||
| Increase (decrease) in deferred revenues | (6,686 | ) | 4,733 | ||||||
| Increase (decrease) in other accrued liabilities | 2,233 | (895 | ) | ||||||
| Net cash provided by operating activities | 272 | 9,926 | |||||||
| Cash flows from investing activities: | |||||||||
| Proceeds from sales of short-term investments | 55,266 | — | |||||||
| Purchases of short-term investments | (119,342 | ) | — | ||||||
| Purchases of property and equipment | (2,546 | ) | (2,254 | ) | |||||
| Net cash used in investing activities | (66,622 | ) | (2,254 | ) | |||||
| Cash flows from financing activities: | |||||||||
| Repurchase of common stock | (15 | ) | (35,553 | ) | |||||
| Proceeds from issuance of common stock upon exercise of stock options and purchases under employee stock purchase plan | 1,622 | 1,117 | |||||||
| Net cash provided by (used in) financing activities | 1,607 | (34,436 | ) | ||||||
| Net decrease in cash and cash equivalents | (64,743 | ) | (26,764 | ) | |||||
| Cash and cash equivalents at beginning of period | 118,527 | 189,076 | |||||||
| Cash and cash equivalents at end of period | $ | 53,784 | $ | 162,312 | |||||
| Supplemental disclosure: | |||||||||
| Income taxes paid | $ | 1,799 | $ | 1,582 | |||||
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INET TECHNOLOGIES, INC.
RECONCILIATION BETWEEN GAAP AND PRO FORMA
(Unaudited)
(In thousands, except per share data)
| | Three months ended June 30, | Six months ended June 30, | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | 2004 | 2003 | 2004 | 2003 | |||||||||
| GAAP G&A expenses | $ | 4,565 | $ | 2,061 | $ | 6,826 | $ | 4,480 | |||||
| Merger-related expenses | 2,231 | — | 2,231 | — | |||||||||
| PRO FORMA G&A expenses | $ | 2,334 | $ | 2,061 | $ | 4,595 | $ | 4,480 | |||||
GAAP G&A as % of total revenues | 15.9 | % | 8.1 | % | 12.2 | % | 8.9 | % | |||||
| PRO FORMA G&A as % of total revenues | 8.1 | % | 8.1 | % | 8.2 | % | 8.9 | % | |||||
GAAP operating income | $ | 2,646 | $ | 2,907 | $ | 6,749 | $ | 7,261 | |||||
| Merger-related expenses | 2,231 | — | 2,231 | — | |||||||||
| PRO FORMA operating income | $ | 4,877 | $ | 2,907 | $ | 8,980 | $ | 7,261 | |||||
GAAP operating income margin | 9.2 | % | 11.4 | % | 12.1 | % | 14.4 | % | |||||
| PRO FORMA operating income margin | 17.0 | % | 11.4 | % | 16.1 | % | 14.4 | % | |||||
GAAP net income | $ | 1,817 | $ | 2,271 | $ | 5,093 | $ | 5,526 | |||||
| Merger-related expenses | 2,231 | — | 2,231 | — | |||||||||
| PRO FORMA net income | $ | 4,048 | $ | 2,271 | $ | 7,324 | $ | 5,526 | |||||
GAAP earnings per share — basic | $ | 0.05 | $ | 0.06 | $ | 0.13 | $ | 0.14 | |||||
| PRO FORMA earnings per share—basic | $ | 0.10 | $ | 0.06 | $ | 0.19 | $ | 0.14 | |||||
GAAP earnings per share—diluted | $ | 0.05 | $ | 0.06 | $ | 0.13 | $ | 0.14 | |||||
| PRO FORMA earnings per share—diluted | $ | 0.10 | $ | 0.06 | $ | 0.18 | $ | 0.14 | |||||
The pro forma net income information is presented for informational purposes only as an alternative view of the Company's operating results. In the calculation of Inet's pro forma earnings results, Inet excludes certain merger-related expenses including legal and investment banking fees. Inet believes that excluding these items provides investors with a representation of the Company's core operating performance. The pro forma information should not be considered as a substitute for financial information presented in accordance with generally accepted accounting principles, and may be different from pro forma measures used by other companies.
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INET TECHNOLOGIES, INC.
ADDITIONAL FINANCIAL INFORMATION
(Unaudited)
The following table presents additional financial information about Inet Technologies, Inc. for the three months ended June 30, 2004; March 31, 2004; December 31, 2003; September 30, 2003 and June 30, 2003, respectively.
| | 6/30/04 | 3/31/04 | 12/31/03 | 9/30/03 | 6/30/03 | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Total revenues (in 000s) | $ | 28,690(1 | ) | $ | 27,212 | $ | 27,271 | $ | 26,034 | $ | 25,472 | ||||||
| Cash (in 000s) | $ | 53,784 | $ | 72,898 | $ | 118,527 | $ | 168,742 | $ | 162,312 | |||||||
| Short-term investments (in 000s) | $ | 119,594 | $ | 99,267 | $ | 55,034 | — | — | |||||||||
| Days sales outstanding (with unbilled) | 34 | 51 | 37 | 27 | 50 | ||||||||||||
| Inventory (in 000s): | |||||||||||||||||
| Raw materials | $ | 3,177 | $ | 3,430 | $ | 3,498 | $ | 2,856 | $ | 2,765 | |||||||
| WIP | 268 | 128 | 219 | 90 | 412 | ||||||||||||
| Finished goods | 5,766 | 5,399 | 4,207 | 3,669 | 3,592 | ||||||||||||
| $ | 9,211 | $ | 8,957 | $ | 7,924 | $ | 6,615 | $ | 6,769 | ||||||||
| Inventory turns | 3.8 | 3.8 | 4.5 | 5.1 | 5.7 | ||||||||||||
| Total employees: | 497 | 501 | 483 | 479 | 475 | ||||||||||||
| R&D | 248 | 254 | 245 | 243 | 242 | ||||||||||||
| Support/Integration | 124 | 126 | 127 | 124 | 122 | ||||||||||||
| Sales and marketing | 77 | 75 | 66 | 69 | 66 | ||||||||||||
| General and administrative | 48 | 46 | 45 | 43 | 45 | ||||||||||||
| Margins and operating expenses as a % of total revenues: | |||||||||||||||||
| Gross margin—total | 69.3 | % | 69.1 | % | 67.2 | % | 67.5 | % | 62.2 | % | |||||||
| Gross margin—product & license fees | 72.9 | 73.4 | 69.7 | 73.9 | 64.3 | ||||||||||||
| Gross margin—services | 60.4 | 57.9 | 60.5 | 53.0 | 57.1 | ||||||||||||
| Research and development | 27.0 | 29.9 | 27.3 | 28.5 | 28.5 | ||||||||||||
| Sales and marketing | 17.2 | 15.8 | 16.6 | 14.9 | 14.2 | ||||||||||||
| General and administrative | 15.9 | 8.3 | 8.2 | 9.4 | 8.1 | ||||||||||||
| Operating income margin | 9.2 | 15.1 | 15.2 | 14.7 | 11.4 | ||||||||||||
| Net income margin | 6.3 | 12.0 | 12.4 | 10.7 | 8.9 | ||||||||||||
| Operating cash flow (in 000s) | $ | 2,349 | $ | (2,077 | ) | $ | 5,765 | $ | 5,642 | $ | 116 | ||||||
| Capital expenditures (in 000s) | $ | 1,686 | $ | 860 | $ | 1,066 | $ | 666 | $ | 1,322 | |||||||
| Common stock outstanding (in 000s) | 39,255 | 39,220 | 38,920 | 38,722 | 38,436 | ||||||||||||
| Revenues from international markets: | 63 | % | 62 | % | 77 | % | 63 | % | 72 | % | |||||||
| EMEA | 48 | % | 55 | % | 70 | % | 53 | % | 61 | % | |||||||
| Asia/Pacific | 14 | % | 5 | % | 6 | % | 8 | % | 9 | % | |||||||
| Other | 1 | % | 2 | % | 1 | % | 2 | % | 3 | % | |||||||
| % of total revenues from wireless customers | 34 | % | 41 | % | 28 | % | 18 | % | 49 | % | |||||||
| Top 10 customers as % of total revenues | 59 | % | 73 | % | 66 | % | 71 | % | 60 | % | |||||||
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