Rainbow (NASDAQ:RNBO)
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Rainbow Technologies Reports Strong Q4 and FY 2003 Earnings
Earnings and Revenues Increase on Continued Strong Demand for Secure
Communications Products, eSecurity Products; SafeNet Merger Outlook Points To
Positive Growth
IRVINE, Calif., Feb. 11 /PRNewswire-FirstCall/ -- Rainbow Technologies, Inc.,
a leading provider of digital content and transaction security for the Internet,
SSL VPNs, software applications and high assurance security solutions, today
announced revenues for Q4 2003 of $39.2 million, up 17 percent year-over-year.
The company reported GAAP net income of $2.8 million, or $0.10 per share in
Q4-2003, compared with a profit from continuing operations of $0.08 per share in
Q4-2002. Total GAAP net income for Q4-2002 was $4.8 million, or $0.18 per
share. In addition, the company incurred approximately $2.3 million in expenses
related to the anticipated merger with SafeNet, Inc. These expenses were
partially offset by a $1.1 million change in estimates that resulted in a
reduction for certain reserves.
For FY2003, Rainbow Technologies reported GAAP revenues of $141.8 million in
FY2003 compared with $126.0 million in FY2002. Rainbow's FY2003 GAAP earnings
were $7.5 million, or $0.28 per diluted share, compared with a FY2002 net loss
of $37.7 million, or $1.43 per diluted share.
GAAP revenues for the company's Secure Communications business segment for Q4
were $22.9 million, up 12 percent year-over-year. The growth is primarily
attributed to strong demand for high performance secure communications chips.
Q4-2003 GAAP revenues for the eSecurity business segment were $16.75 million, up
25 percent year-over-year. The increase in revenue in the eSecurity segment is
primarily due to revenues of acquired Luna products from Chrysalis. The
acquisition of Chrysalis-ITS was completed last quarter.
"I am pleased that we have met our quarterly and annual revenue goals," said
Walt Straub, president and CEO, Rainbow Technologies. "I am optimistic about
the growth opportunities for Rainbow in 2004. In October 2003, we announced a
plan to merge with SafeNet. The merger is subject to shareholder approval and
other conditions. I strongly believe the combined company will become the
premier network security and OEM security provider."
Excluding the impact of the $2.3 million in merger-related expenses, the
non-GAAP earnings per share for Q4-2003 were approximately $0.16 per share.
Excluding the impact of the merger-related expenses and $3.6 million in
litigation settlement expenses incurred during Q2-2003, the non-GAAP earnings
per share for FY2003 were approximately $0.45 per share.
Q4-2003 FY-2003
Non-GAAP net/share $0.16 $0.45
Merger Exp ($0.06) ($0.06)
Litigation $0.00 ($0.09)
GAAP net/share $0.10 $0.28
Conference Call
Rainbow Technologies will host its Q4 and FY2003 earnings conference call this
afternoon at 2:00 p.m. PST (5:00 p.m. EST). Individuals may listen to the
meeting by conference call dial-in (888) 261-2573. In addition, the meeting can
be accessed via audio replay dial-in (800) 642-1687 or (706) 679-8222, reference
conference ID 5419186. The audio replay will be available for one week. In
addition, the conference call will be Webcast. The Webcast can be accessed via
the company's website at http://www.rainbow.com/ and going to the Investor
Relations link.
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, Luna and iKey are
trademarks of Rainbow Technologies, Inc. All other company and product names
are trademarks of their respective organizations.
CAUTIONARY STATEMENT REGARDING FORWARD LOOKING STATEMENTS
Statements contained in this release that are not historical facts could be
deemed to be 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.
These statements are based on management's current expectations and beliefs, are
not guarantees of future performance and are subject to a number of risks,
uncertainties and assumptions that could cause actual results to differ
materially from those described in the forward-looking statements, including,
among others: general industry trends, the risk that the SafeNet and Rainbow
businesses will not be integrated successfully; costs related to the proposed
merger; the risk that SafeNet and Rainbow will fail to obtain the required
stockholder approvals; the risk that the transaction will not close; the risk
that the businesses of the companies will suffer due to uncertainty; and other
economic, business,competitive, and/or regulatory factors affecting the SafeNet
and Rainbow businesses generally, including those set forth in their filings
with the Securities and Exchange Commission, including each of Rainbow's and
SafeNet's Annual Reports on Form 10-Kfor the fiscal year ended December 31.
2002, their most recent Quarterly Reports on Form 10-Q and their Current Reports
on Form 8-K. If any of these risks or uncertainties materializes or any of
these assumptions proves incorrect, SafeNet's and Rainbow's results could differ
materially from SafeNet's and Rainbow's expectations in these statements.
SafeNet and Rainbow assume no obligation and do not intend to update or alter
these forward-looking statements, whether as a result of new information, future
events, or otherwise.
SafeNet and Rainbow filed with the SEC a joint proxy statement/prospectus and
other relevant materials in connection with the merger of SafeNet and Rainbow.
The joint proxy statement/prospectus will be mailed to the stockholders of
SafeNet and Rainbow. Investors and security holders of SafeNet and Rainbow are
urged to read the joint proxy statement/prospectus and the other relevant
materials when they become available because they will contain important
information aboutSafeNet, Rainbow and the merger. The joint proxy
statement/prospectus and other relevant materials (when they become available),
and any other documents filed by SafeNet or Rainbow with the SEC, may be
obtained free of charge at the SEC's web site at http://www.sec.gov/ . In
addition, investors and security holders may obtain free copies of the documents
filed with the SEC by SafeNet by contacting Michelle Layne, SafeNet Investor
Relations, 4690 Millenium Drive, Belcamp, Maryland 21017, (443) 327-1239.
Investors and security holders may obtain free copies of the documents filed
with the SEC by Rainbow by contacting Rainbow Investor Relations, 50 Technology
Drive, Irvine, California 92718 (949) 450-7377. Investors and security holders
are urged toread the joint proxy statement/prospectus and the other relevant
materials when they become available before making any voting or investment
decision.
SafeNet and its executive officers, directors and employees may be deemed to be
participants in the solicitation of proxies from the stockholders of SafeNet and
Rainbow in favor of the transaction. A list of the names of SafeNet's executive
officers and directors, and a description of their respective interests in
SafeNet, are set forth in the proxy statement for SafeNet's 2003 Annual Meeting
of Stockholders, which was filed with the SEC on April 30, 2003. Investors and
security holders may obtain additional information regarding the interests of
SafeNet's executive officers and directors in the transaction by reading the
joint proxy statement/prospectus.
Rainbow and its executive officers, directors and employees may be deemed to be
participants in the solicitation of proxies from the stockholders of SafeNet and
Rainbow in favor of the transaction. A list of the names of Rainbow's executive
officers and directors, and a description of their respective interests in
Rainbow, are set forth in the proxy statement for Rainbow's 2003 Annual Meeting
of Stockholders, which was filed with the SEC onApril 28, 2003. Investors and
security holders may obtain additional information regarding the interests of
Rainbow's executive officers and directors in the transaction by reading the
joint proxy statement/prospectus.
RAINBOWTECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share amounts)
Three months ended
Dec. 31, % of Dec. 31, % of %
2003 Revenues 2002 Revenues Change
Revenues:
eSecurity Products $16,275 42% $13,068 39% 25%
Secure Communications
Products 22,939 58% 20,476 61% 12%
Total revenues 39,214 100% 33,544 100% 17%
Operating expenses:
Cost of eSecurity
Products 4,458 11% 4,083 12% 9%
Cost of Secure
Communications
Products 13,735 35% 14,238 42% -4%
Selling, general and
administrative 13,637 35% 9,613 29% 42%
Research and development 2,823 7% 1,828 5% 54%
Litigation settlement -- 0% -- 0% --
Total operating
expenses 34,653 88% 29,762 89% 16%
Operating income (loss) 4,561 12% 3,782 11% 21%
Income (loss) on long-
term investments and
marketable securities (82) 0% 10 0% -920%
Change in value for
common stock to be
issued (456) -1% - 0% -
Other expense, net (260) -1% (1,009) -3% -74%
Income (loss) from
continuing operations
before income taxes 3,763 10% 2,783 8% 35%
Provision for income
taxes (846) -2% (580) -2% 46%
Income (loss) from
continuing operations 2,917 7% 2,203 7% 32%
Income (loss) from
discontinued
operations, net of
applicable taxes (7) 0% 2,660 8%-100%
Net income (loss) $2,910 7% $4,863 14% -40%
Basic income (loss)
per share:
Continuing operations $0.11 $0.08
Discontinued operations (0.00) 0.11
Net income (loss) $0.11 $0.19
Diluted income (loss)
per share:
Continuing operations $0.10 $0.08
Discontinued operations (0.00) 0.10
Net income (loss) $0.10 $0.18
Shares in computing net
income (loss) per share:
Basic 27,084 26,239
Diluted 28,708 27,044
Twelve months ended
Dec. 31, % of Dec. 31, % of %
2003 Revenues 2002 Revenues Change
Revenues:
eSecurity Products $54,119 38% $48,818 39% 11%
Secure Communications
Products87,709 62% 77,234 61% 14%
Total revenues 141,828 100% 126,052 100% 13%
Operating expenses:
Cost of eSecurity
Products 16,467 12% 33,422 27% -51%
Cost of Secure
Communications
Products 62,918 44% 58,365 46% 8%
Selling, general and
administrative 38,121 27% 33,480 27% 14%
Research and development 8,779 6% 8,923 7% -2%
Litigation settlement 3,632 3% -- 0% --
Total operating
expenses 129,917 92% 134,190 106% -3%
Operating income (loss) 11,911 8% (8,138) -6% -246%
Income (loss) on long-
term investments and
marketable securities (1,286) -1% (98) 0% 1212%
Change in value for
common stock to be
issued (789) -1% -- 0% --
Other expense, net (10) 0% (478) 0% -98%
Income (loss) from
continuing operations
before income taxes 9,826 7% (8,714) -7% -213%
Provision for income
taxes (1,998) -1% (14,313) -11% -86%
Income (loss) from
continuing operations 7,828 6% (23,027) -18% -134%
Income (loss) from
discontinued
operations, net of
applicable taxes (261) 0% (14,647) -12% -98%
Net income (loss) $7,567 5% $(37,674) -30% -120%
Basic income (loss)
per share:
Continuing operations $0.29 $(0.87)
Discontinued operations (0.01) (0.56)
Net income (loss) $0.28 $(1.43)
Diluted income (loss)
per share:
Continuing operations $0.28 $(0.87)
Discontinued operations (0.01) (0.56)
Net income (loss) $0.27 $(1.43)
Shares in computing net
income (loss)
per share:
Basic 26,796 26,419
Diluted 27,786 26,419
RAINBOW TECHNOLOGIES, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
Dec. 31, Dec. 31,
2003 2002
ASSETS
Current assets:
Cash and cash equivalents $63,455 $50,922
Marketable available-for-sale
and trading securities 311 301
Accounts receivable, net of allowance
for doubtful accounts of $500 and $626
in 2003 and 2002, respectively 16,835 19,221
Inventories 12,031 9,308
Income tax receivable 625 5,572
Prepaid expenses and other current assets 4,224 1,765
Total current assets 97,481 87,089
Property, plant and equipment, at cost:
Equipment 23,167 21,981
Buildings 9,215 7,769
Furniture 3,991 2,909
Leasehold improvements 3,668 2,889
40,041 35,548
Less accumulated depreciation and
amortization 26,224 21,628
Net property, plant and equipment 13,817 13,920
Software development costs, net of
accumulated amortization of $5,492
and $8,156 in 2003 and 2002, respectively 2,844 3,775
Product licenses, net of accumulated
amortization of $5,670 and $5,567 in
2003 and 2002, respectively 1,674 2,944
Intangible assets, net of accumulated
amortization of $627 and $34 in
2003 and 2002, respectively 9,951 101
Goodwill 10,122 2,680
Other assets 518 1,080
Total Assets $136,407 $111,589
LIABILITIES ANDSHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $7,979 $8,138
Accrued payroll and related expenses 7,702 6,602
Warranty reserve 1,2791,844
Deferred income 1,622 135
Income taxes payable 3,380 1,442
Accrued litigation settlement 2,421 --
Accrued expenses and other current
liabilities 9,874 6,773
Total current liabilities 34,257 24,934
Long-term accrued restructuring costs 2,019 2,349
Other liabilities 3,104 1,926
Commitments and contingencies
Shareholders' equity:
Common stock, $.001 par value,
55,000,000 shares authorized,
27,160,574 and 26,268,936 shares
issued and outstanding in 2003 and
2002, respectively 27 26
Additional paid-in capital 60,508 58,313
Accumulated other comprehensive income 5,232 348
Retained earnings 31,260 23,693
Total shareholders' equity 97,027 82,380
Total Liabilities and Shareholders'
Equity $136,407 $111,589
DATASOURCE: Rainbow Technologies, Inc.
CONTACT: Dan Chmielewski of Rainbow Technologies, Inc., +1-949-450-7377,
Web site: http://www.rainbow.com/