Exhibit 99
NEWS RELEASE
Donna Smith, Manager Investor Relations | Dan Chmielewski | |
Rainbow Technologies, Inc. | Rainbow Technologies, Inc. | |
(949) 450-7350 | 949-450-7377 | |
f: (949) 753-9507 | dchm@rainbow.com | |
dsmith@rainbow.com |
Rainbow Technologies Q2-2003 Financial Results
Legal Settlement Expense Impacts Earnings That Met Revised Guidance
IRVINE, California – July 23, 2003 —Rainbow Technologies, Inc. (Nasdaq:RNBO) today announced revenues for Q2 2003 of $33.3 million, up 8 percent year-over-year. The company reported a loss of $0.02 per share, which includes a $3.6 million litigation settlement expense, versus a $1.09 loss per share from continuing operations in Q2 2002.
Last week, the company negotiated a settlement relating to a pending litigation matter for which it has been incurring substantial legal expenses. Excluding the settlement cost of $3.6 million and tax effect, the company earned $0.09 per share, in line with revised estimates issued by the company on July 2, 2003.
Revenue for the company’s Secure Communications business segment for the second quarter was $21.3 million, up 14% year-over-year. The growth is attributed to strong demand for network link encryptors, voice and data security solutions, and commercial high-assurance security products. The company forecasts continued favorable performance for this segment as a result of increased product demand and strong backlog.
Second quarter revenue for the eSecurity business segment was $12.1 million, down 2 percent year-over-year due to planned attrition in OEM product revenues. On a global basis, the company is experiencing solid demand for its software protection products, and sales activity for its iKey and iGate products has shown improvement. During the quarter, the company acquired Proteq, Ltd., the largest supplier of software protection technology in South America, to create Rainbow-Brazil. The Brazilian IT market is anticipated to
grow about 10 percent over the next three years and has strong government support for PKI. The company anticipates sequential revenue improvement for the eSecurity segment in Q4 2003.
“Rainbow anticipates that total revenues for Q3 and Q4 2003 will be up sequentially, due primarily to continued strength in the government business and international markets. Ongoing softness in IT spending, particularly in North America, continues to impact our eSecurity division,” said Walt Straub, President and CEO of Rainbow.
Rainbow will host a conference call and Web cast on Wednesday, July 23, 2003, at 1:30 p.m., PDT. Participants may access the conference at (888) 261-2573. To access the live Web cast, go to the company’s Website at www.rainbow.com and select the Investor Relations navigation button. Click on the Web cast link. The Web cast will be available for seven business days following the conference, and will be available thereafter at the Investor Relations Archive navigation button. Audio replay will be available at (800) 642-1687 or (706) 645-9291 at approximately 4:30 p.m., PDT, on July 23, 2003, reference passcode 1638236.
About Rainbow Technologies, Inc.
Making security simple since 1979, Rainbow Technologies is a leading provider of proven information security solutions for mission-critical data and applications used in business, organization and government computing environments. Rainbow has been breaking the security paradigm by making complex security simple to implement and use for more than two decades. With headquarters in Irvine, Calif., Rainbow maintains offices and authorized distributors throughout the world. For more information, visit the Web site at http://www.rainbow.com.
Rainbow Technologies, Rainbow Mykotronx, NetSwift iGate and iKey are trademarks of Rainbow Technologies, Inc. All other company and product names are trademarks of their respective organizations.
# # #
The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward-looking statements, certain of which are contained in this press release and include, but are not limited to, the outlook for business segment performance, revenue, backlog, litigation, tax effect, IT spending, particularly in North America, outlook for future business performance, and global business environment. These statements speak only as of the date of this press release and are subject to various risks and uncertainties that could impact actual results.
RAINBOW TECHNOLOGIES, INC
Financial Highlights
(in thousands, except per share amounts)
Three months ended | Six months ended | ||||||||||||||||
June 30, 2003 | June 30, 2002 | June 30, 2003 | June 30, 2002 | ||||||||||||||
Revenues | $ | 33,304 | $ | 30,980 | $ | 67,173 | $ | 62,165 | |||||||||
Income (loss) from continuing operations | $ | (693 | ) | $ | (28,959 | ) | $ | 2,362 | $ | (27,686 | ) | ||||||
Loss from discontinued operations | $ | — | $ | (15,963 | ) | $ | (86 | ) | $ | (16,668 | ) | ||||||
Net income (loss) | $ | (693 | ) | $ | (44,922 | ) | $ | 2,276 | $ | (44,354 | ) | ||||||
Basic income (loss) per share: | |||||||||||||||||
Continuing operations | $ | (0.03 | ) | $ | (1.09 | ) | $ | 0.09 | $ | (1.05 | ) | ||||||
Discontinued operations | — | (0.60 | ) | — | (0.63 | ) | |||||||||||
Net income (loss) | $ | (0.03 | ) | $ | (1.69 | ) | $ | 0.09 | $ | (1.68 | ) | ||||||
Diluted income (loss) per share: | |||||||||||||||||
Continuing operations | $ | (0.02 | ) | $ | (1.09 | ) | $ | 0.08 | $ | (1.05 | ) | ||||||
Discontinued operations | — | (0.60 | ) | — | (0.63 | ) | |||||||||||
Net income (loss) | $ | (0.02 | ) | $ | (1.69 | ) | $ | 0.08 | $ | (1.68 | ) | ||||||
Weighted average shares: | |||||||||||||||||
Basic | 26,830 | 26,546 | 26,645 | 26,476 | |||||||||||||
Diluted | 28,103 | 26,546 | 27,919 | 26,476 |
By Business Segment
Three months ended | Six months ended | ||||||||||||||||
June 30, 2003 | June 30, 2002 | June 30, 2003 | June 30, 2002 | ||||||||||||||
Revenues: | |||||||||||||||||
eSecurity Products | $ | 12,053 | $ | 12,280 | $ | 25,310 | $ | 24,333 | |||||||||
Secure Communications Products | 21,251 | 18,700 | 41,863 | 37,832 | |||||||||||||
Consolidated | $ | 33,304 | $ | 30,980 | $ | 67,173 | $ | 62,165 | |||||||||
Operating Income (Loss): | |||||||||||||||||
eSecurity Products | $ | (2,349 | ) | $ | (17,803 | ) | $ | (2,297 | ) | $ | (19,823 | ) | |||||
Secure Communications Products | 1,869 | 2,170 | 5,656 | 5,555 | |||||||||||||
Consolidated | $ | (480 | ) | $ | (15,633 | ) | $ | 3,359 | $ | (14,268 | ) | ||||||
RAINBOW TECHNOLOGIES, INC
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
Three months ended | Six months ended | ||||||||||||||||||||||||||||||||||||||||
June 30, | % of | June 30, | % of | % | June 30, | % of | June 30, | % of | % | ||||||||||||||||||||||||||||||||
2003 | Revenues | 2002 | Revenues | Change | 2003 | Revenues | 2002 | Revenues | Change | ||||||||||||||||||||||||||||||||
Revenues: | |||||||||||||||||||||||||||||||||||||||||
eSecurity Products | $ | 12,053 | 36 | % | $ | 12,280 | 40 | % | -2 | % | $ | 25,310 | 38 | % | $ | 24,333 | 39 | % | 4 | % | |||||||||||||||||||||
Secure Communications Products | 21,251 | 64 | % | 18,700 | 60 | % | 14 | % | 41,863 | 62 | % | 37,832 | 61 | % | 11 | % | |||||||||||||||||||||||||
Total revenues | 33,304 | 100 | % | 30,980 | 100 | % | 8 | % | 67,173 | 100 | % | 62,165 | 100 | % | 8 | % | |||||||||||||||||||||||||
Operating expenses: | |||||||||||||||||||||||||||||||||||||||||
Cost of eSecurity Products | 4,163 | 13 | % | 19,225 | 62 | % | -78 | % | 9,144 | 14 | % | 25,362 | 41 | % | -64 | % | |||||||||||||||||||||||||
Cost of Secure Communications Products | 15,620 | 47 | % | 15,107 | 49 | % | 3 | % | 31,215 | 46 | % | 30,250 | 49 | % | 3 | % | |||||||||||||||||||||||||
Selling, general and administrative | 8,164 | 25 | % | 9,400 | 30 | % | -13 | % | 15,882 | 24 | % | 16,091 | 26 | % | -1 | % | |||||||||||||||||||||||||
Research and development | 2,205 | 7 | % | 2,881 | 9 | % | -23 | % | 3,941 | 6 | % | 4,730 | 8 | % | -17 | % | |||||||||||||||||||||||||
Litigation settlement | 3,632 | 11 | % | — | 0 | % | — | 3,632 | 5 | % | — | 0 | % | — | |||||||||||||||||||||||||||
Total operating expenses | 33,784 | 101 | % | 46,613 | 150 | % | -28 | % | 63,814 | 95 | % | 76,433 | 123 | % | -17 | % | |||||||||||||||||||||||||
Operating income (loss) | (480 | ) | -1 | % | (15,633 | ) | -50 | % | -97 | % | 3,359 | 5 | % | (14,268 | ) | -23 | % | -124 | % | ||||||||||||||||||||||
Loss on long-term investments and marketable securities | (371 | ) | -1 | % | (59 | ) | 0 | % | 529 | % | (1,207 | ) | -2 | % | (90 | ) | 0 | % | 1241 | % | |||||||||||||||||||||
Interest income | 135 | 0 | % | 119 | 0 | % | 13 | % | 249 | 0 | % | 207 | 0 | % | 20 | % | |||||||||||||||||||||||||
Interest expense | (18 | ) | 0 | % | (31 | ) | 0 | % | -42 | % | (36 | ) | 0 | % | (79 | ) | 0 | % | -54 | % | |||||||||||||||||||||
Other income, net | 19 | 0 | % | 29 | 0 | % | -34 | % | 515 | 1 | % | 277 | 0 | % | 86 | % | |||||||||||||||||||||||||
Income (loss) from continuing operations before income taxes | (715 | ) | -2 | % | (15,575 | ) | -50 | % | -95 | % | 2,880 | 4 | % | (13,953 | ) | -22 | % | -121 | % | ||||||||||||||||||||||
Provision for income taxes | 22 | 0 | % | (13,384 | ) | -43 | % | -100 | % | (518 | ) | -1 | % | (13,733 | ) | -22 | % | -96 | % | ||||||||||||||||||||||
Income (loss) from continuing operations | (693 | ) | -2 | % | (28,959 | ) | -93 | % | -98 | % | 2,362 | 4 | % | (27,686 | ) | -45 | % | -109 | % | ||||||||||||||||||||||
Loss from discontinued operations, net of applicable taxes | — | 0 | % | (15,963 | ) | -52 | % | -100 | % | (86 | ) | 0 | % | (16,668 | ) | -27 | % | -99 | % | ||||||||||||||||||||||
Net income (loss) | $ | (693 | ) | -2 | % | $ | (44,922 | ) | -145 | % | -98 | % | $ | 2,276 | 3 | % | $ | (44,354 | ) | -71 | % | -105 | % | ||||||||||||||||||
Basic income (loss) per share: | |||||||||||||||||||||||||||||||||||||||||
Continuing operations | $ | (0.03 | ) | $ | (1.09 | ) | $ | 0.09 | $ | (1.05 | ) | ||||||||||||||||||||||||||||||
Discontinued operations | — | (0.60 | ) | — | (0.63 | ) | |||||||||||||||||||||||||||||||||||
Net income (loss) | $ | (0.03 | ) | $ | (1.69 | ) | $ | 0.09 | $ | (1.68 | ) | ||||||||||||||||||||||||||||||
Diluted income (loss) per share: | |||||||||||||||||||||||||||||||||||||||||
Continuing operations | $ | (0.02 | ) | $ | (1.09 | ) | $ | 0.08 | $ | (1.05 | ) | ||||||||||||||||||||||||||||||
Discontinued operations | — | (0.60 | ) | — | (0.63 | ) | |||||||||||||||||||||||||||||||||||
Net income (loss) | $ | (0.02 | ) | $ | (1.69 | ) | $ | 0.08 | $ | (1.68 | ) | ||||||||||||||||||||||||||||||
Weighted average shares: | |||||||||||||||||||||||||||||||||||||||||
Basic | 26,830 | 26,546 | 26,645 | 26,476 | |||||||||||||||||||||||||||||||||||||
Diluted | 28,103 | 26,546 | 27,919 | 26,476 | |||||||||||||||||||||||||||||||||||||
RAINBOW TECHNOLOGIES, INC
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
June 30, 2003 | December 31, 2002 | ||||||||
ASSETS | |||||||||
Current assets: | |||||||||
Cash and cash equivalents | $ | 58,973 | $ | 50,922 | |||||
Marketable available-for-sale and trading securities | 249 | 301 | |||||||
Accounts receivable, net of allowance for doubtful accounts of $583 and $626 in 2003 and 2002, respectively | 18,327 | 19,221 | |||||||
Inventories | 9,549 | 9,308 | |||||||
Income tax receivable | 5,967 | 5,572 | |||||||
Prepaid expenses and other current assets | 3,324 | 1,765 | |||||||
Total current assets | 96,389 | 87,089 | |||||||
Property, plant and equipment, at cost: | |||||||||
Equipment | 22,806 | 21,981 | |||||||
Buildings | 8,449 | 7,769 | |||||||
Furniture | 3,038 | 2,909 | |||||||
Leasehold improvements | 3,068 | 2,889 | |||||||
37,361 | 35,548 | ||||||||
Less accumulated depreciation and amortization | 23,919 | 21,628 | |||||||
Net property, plant and equipment | 13,442 | 13,920 | |||||||
Software development costs, net of accumulated amortization of $9,190 and and $8,156 in 2003 and 2002, respectively | 3,379 | 3,775 | |||||||
Product licenses, net of accumulated amortization of $6,465 and $5,567 in 2003 and 2002, respectively | 2,902 | 3,726 | |||||||
Goodwill | 2,724 | 1,898 | |||||||
Other assets | 692 | 1,181 | |||||||
Total Assets | $ | 119,528 | $ | 111,589 | |||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||||
Current liabilities: | |||||||||
Accounts payable | $ | 7,673 | $ | 8,138 | |||||
Accrued payroll and related expenses | 4,701 | 6,602 | |||||||
Warranty reserve | 2,185 | 1,844 | |||||||
Income taxes payable | 2,075 | 1,442 | |||||||
Other accrued liabilities | 8,148 | 6,908 | |||||||
Total current liabilities | 24,782 | 24,934 | |||||||
Long-term accrued restructuring costs | 2,121 | 2,349 | |||||||
Other liabilities | 1,605 | 1,926 | |||||||
Commitments and contingencies | |||||||||
Shareholders’ equity: | |||||||||
Common stock, $001 par value, 55,000,000 shares authorized, 26,775,462 and 26,268,936 shares issued and outstanding in 2003 and 2002, respectively | 27 | 26 | |||||||
Common stock to be issued | 1,632 | — | |||||||
Additional paid-in capital | 61,515 | 58,313 | |||||||
Accumulated other comprehensive income | 2,762 | 348 | |||||||
Retained earnings | 25,969 | 23,693 | |||||||
91,905 | 82,380 | ||||||||
Less cost of treasury shares (102,973 shares) | (885 | ) | — | ||||||
Total shareholders’ equity | 91,020 | 82,380 | |||||||
Total Liabilities and Shareholders’ Equity | $ | 119,528 | $ | 111,589 | |||||