SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) January 29, 1999.
CYLINK CORPORATION
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(Exact name of registrant as specified in its charter)
California 0-27742 95-3891600
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
910 Hermosa Court, Sunnyvale, California 94086
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (408) 735-5822
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NONE
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(Former name or former address, if changed since last report)
<PAGE>
Item 5. Other Events
Cylink Corporation is filing this optional Report on Form 8-K to ensure
that its restated financial results for the first and second quarters of 1998,
the fourth quarter of 1997 and the year ended December 31, 1997, which were
previously reported in a press release, are formally filed pursuant to the
Securities Exchange Act of 1934. The press release, as well as restated
financial statements for the periods referenced above, is attached to this Form
8-K as Exhibit 99.1 and is incorporated herein by reference.
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<PAGE>
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(a) Not applicable
(b) Not applicable
(c) Exhibits
Exhibit 99.1 Cylink Corporation Press Release dated December 16,
1998 regarding restated financial results, and
restated financial statements.
-3-
<PAGE>
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 hereunto duly authorized.
CYLINK CORPORATION
Date: January __, 1999 /s/ Robert B. Fougner
------------------------------
Robert B. Fougner
General Counsel
-4-
<PAGE>
EXHIBIT INDEX
Exhibit
Number Document Description
------ --------------------
99.1 Cylink Corporation Press Release dated December 16,
1998 regarding restated financial results.
FOR IMMEDIATE RELEASE
Contacts:
Roger Barnes Howard Kalt
Cylink Corporation Kalt, Rosen & Associates
408-328-5125 415-397-2686
CYLINK CORP. REPORTS RESULTS FOR 3RD QUARTER,
RESTATES RESULTS FOR PRIOR PERIODS
SUNNYVALE, CA., December 16, 1998--Cylink Corporation (NASDAQ: CYLK,
CYLKE) today reported financial results for the third quarter ended September
27, 1998, and restated results for both the first and second quarters of the
current fiscal year as well as for 1997.
On November 5, 1998, the company publicly announced that it and its
independent accountants had initiated a review of revenue recognition practices
which would result in a restatement of previously issued first and second
quarter 1998 results and that all three quarters of 1998 were expected to show
substantial operating losses. During the review, certain facts became known
indicating errors had been made in the application of revenue recognition
policies which also impacted the fourth quarter of 1997, and as a result, 1997
full-year results have been restated.
For the third quarter of 1998, the company reported a net loss of $5.7
million, or $.20 per share (basic and diluted) on revenues totaling $12.1
million. In the same quarter a year ago, the company's net loss was $62.9
million, or $2.37 per share (basic and diluted), on revenues of $13.1 million.
Results for the third quarter a year ago included net income from discontinued
operations of $.8 million, or $.03 per share (basic and diluted) and a pretax,
non-recurring purchased in-process technology charge of $63.9 million, or $2.41
per share (basic and diluted), for certain costs associated with the acquisition
of Algorithmic Research.
-more-
<PAGE>
Cylink Corp. Reports Earnings Results Page 2
The company's restated results for the second quarter of 1998 reflect a
net loss of $1.7 million, or $0.06 per share (basic and diluted) on revenues of
$12.4 million. This compares with previously reported net income of $1.7
million, or $0.06 per share (basic and diluted) on revenues of $18.0 million. In
the same quarter a year ago, the company's net income was $1.2 million, or $.05
per share (basic and diluted), on revenues of $11.6 million. Results for the
quarter a year ago included net income from discontinued operations of $1.0
million, or $.04 per share (basic and diluted).
The company's restated results for the first quarter of 1998 reflect
net income of $19.1 million, or $0.66 per share (basic and diluted) on revenues
of $8.1 million. Restated net income for the first quarter of 1998 includes a
loss from discontinued operations of $0.3 million, and an after tax gain on
disposal of discontinued operations of $22.8 million, or $0.78 per share (basic
and diluted). These results compare with previously reported net income of $23.7
million, or $0.82 per share (basic and diluted) on revenues of $15.8 million. In
the same quarter a year ago, the company's net income was $1.1 million, or $0.04
per share, on revenues of $9.4 million. Net income for the quarter a year ago
included net income from discontinued operations of $1.2 million, or $.04 per
share (basic and diluted).
Results for the fourth quarter of 1997 were also restated when certain
facts became known that affected the application of the company's revenue
recognition policies during that period. The company's restated results for the
forth quarter of 1997 reflect a net loss of $1.2 million, or $0.04 per share
(basic and diluted) on revenues of $13.6 million. Restated results for the
fourth quarter, 1997 included net income from discontinued operations of $.3
million or $.01 per share (basic and diluted). Restated results for the fiscal
year ended December 31, 1997 reflected a net loss of $61.7 million, or $2.31 per
share, which includes net income from discontinued operations of $3.2 million,
or $0.12 per share. Previously reported results for the fiscal year 1997
reflected a net loss of $58.8 million, or $2.20 per share (basic and diluted) on
revenues of $49.3 million. Previously reported results included net income from
discontinued operations of $4.5 million, or $.17 per share (basic and diluted)
and a pretax, non-recurring purchase in-process technology charge of $63.9
million, or $2.39 per share (basic and diluted), for certain costs associated
with the acquisition of Algorithmic Research.
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<PAGE>
Cylink Corp. Reports Earnings Results Page 3
The company has recently repriced employee stock options with reset
vesting periods to ensure Cylink's ability to retain essential employee and
managerial talent. The timing of the repricing was influenced by the retroactive
deadline imposed by a recent Financial Standards Accounting Board (FASB)
proposal. The proposal could require a significant change to operations had
options been repriced after the December 15, 1998 deadline. The company repriced
employee options for approximately two million shares, and cancelled options
covering approximately 1.25 million shares held by prior members of the senior
management team. Neither William P. Crowell, Cylink's president and acting chief
executive officer, nor Roger A. Barnes, the company's new chief financial
officer, are participating in the repricing, but Crowell has received additional
new options to reflect expanded responsibilities when the board appointed him
president and acting chief executing officer.
In a statement, Crowell said, "In the past six weeks the company has
completed realignment of organizational responsibilities, made corresponding
adjustments in management, and put additional focus on customer service. In
addition, I have met with virtually all employees at our Sunnyvale, Tel Aviv,
U.K., New Jersey and Washington D.C. facilities to review past issues and to
elicit their support of our future plans. Product plan reviews have also been
completed and budgets to support new activities are now being developed. We are
actively engaged with customers in reviewing their major needs for security
products in the future."
"These review have demonstrated that Cylink continues to have a loyal
customer base that is the envy of the security industry, excellent and motivated
employees, excellent products--with more in development, and a solid balance
sheet. We believe that these strengths will enable the new management team to
move forward in realizing the potential of the company, "Crowell added.
About Cylink
Cylink Corporation, and its wholly owned subsidiary, Algorithmic Research, is a
leading provider of encryption-based network security solutions. Their products
enable the secure transmission of data over networks, including local-area
networks (LANs), wide-area networks (WANs), and public packet-switched networks
such as the Internet. Cylink and Algorithmic Research serve Fortune 500
companies, multinational financial institutions, and government agencies
worldwide.
Attached: Financial Schedules
<PAGE>
<TABLE>
CYLINK CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data; unaudited)
<CAPTION>
Three Months Ended Nine Months Ended
------------------------ ------------------------
Sept. 27, Sept. 26, Sept. 27, Sept. 26,
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenue $ 12,130 $ 13,129 $ 32,555 $ 34,065
Cost of revenue 5,924 3,826 12,545 10,021
-------- -------- -------- --------
Gross profit 6,206 9,303 20,010 24,044
-------- -------- -------- --------
Operating expenses:
Research and development, net 6,222 3,394 12,037 9,365
Selling and marketing 6,170 4,006 17,950 10,720
General and administrative 2,452 2,268 5,782 6,291
Purchased in-process technology -- 63,920 -- 63,920
Amortization of purchased intangibles 679 133 2,038 133
-------- -------- -------- --------
Total operating expenses 15,523 73,721 37,807 90,429
-------- -------- -------- --------
Loss from operations (9,317) (64,418) (17,797) (66,385)
Other income 574 739 1,298 2,881
-------- -------- -------- --------
Loss from continuing operations before income taxes (8,743) (63,679) (16,499) (63,504)
Benefit for income taxes 3,060 -- 5,774 --
-------- -------- -------- --------
Loss from continuing operations (5,683) (63,679) (10,725) (63,504)
Income (loss) from discontinued operations, net of tax -- 796 (259) 2,951
Gain on disposal of discontinued operations, net of tax -- -- 22,776 --
-------- -------- -------- --------
Net income (loss) $ (5,683) $(62,883) $ 11,792 $(60,553)
======== ======== ======== ========
Earnings (loss) per share - basic:
Continuing operations $ (0.20) $ (2.40) $ (0.37) $ (2.44)
Discontinued operations -- 0.03 0.78 0.12
-------- -------- -------- --------
Net income (loss) $ (0.20) $ (2.37) $ 0.41 $ (2.32)
======== ======== ======== ========
Earnings (loss) per share - diluted:
Continuing operations $ (0.20) $ (2.40) $ (0.37) $ (2.44)
Discontinued operations -- 0.03 0.78 0.12
-------- -------- -------- --------
Net income (loss) $ (0.20) $ (2.37) $ 0.41 $ (2.32)
======== ======== ======== ========
Shares used in per share calculation - basic 29,082 26,514 28,971 26,046
======== ======== ======== ========
Shares used in per share calculation - diluted 29,082 26,514 28,971 26,046
======== ======== ======== ========
</TABLE>
<PAGE>
<TABLE>
CYLINK CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data; unaudited)
<CAPTION>
Three Months Ended Six Months Ended
----------------------- -----------------------
June 28, June 27, June 28, June 27,
1998 1997 1998 1997
-------- -------- -------- --------
Restated Restated
<S> <C> <C> <C> <C>
Revenue $ 12,363 $ 11,584 $ 20,425 $ 20,936
Cost of revenue 3,990 3,385 6,621 6,195
-------- -------- -------- --------
Gross profit 8,373 8,199 13,804 14,741
-------- -------- -------- --------
Operating expenses:
Research and development, net 2,770 2,953 5,815 5,971
Selling and marketing 6,207 3,932 11,780 6,714
General and administrative 1,852 2,123 3,330 4,023
Amortization of purchased intangibles 680 -- 1,359 --
-------- -------- -------- --------
Total operating expenses 11,509 9,008 22,284 16,708
-------- -------- -------- --------
Loss from operations (3,136) (809) (8,480) (1,967)
Other income 572 1,069 724 2,142
-------- -------- -------- --------
Income (loss) from continuing operations before income taxes (2,564) 260 (7,756) 175
Benefit for income taxes 897 -- 2,714 --
-------- -------- -------- --------
Loss from continuing operations (1,667) 260 (5,042) 175
Income (loss) from discontinued operations, net of tax -- 963 (259) 2,155
Gain on disposal of discontinued operations, net of tax -- -- 22,776 --
-------- -------- -------- --------
Net income (loss) $ (1,667) $ 1,223 $ 17,475 $ 2,330
======== ======== ======== ========
Earnings (loss) per share - basic:
Continuing operations $ (0.06) $ 0.01 $ (0.17) $ 0.01
Discontinued operations -- 0.04 0.77 0.08
-------- -------- -------- --------
Net income (loss) $ (0.06) $ 0.05 $ 0.60 $ 0.09
======== ======== ======== ========
Earnings (loss) per share - diluted:
Continuing operations $ (0.06) $ 0.01 $ (0.17) $ 0.01
Discontinued operations -- 0.04 0.77 0.08
-------- -------- -------- --------
Net income (loss) $ (0.06) $ 0.05 $ 0.60 $ 0.09
======== ======== ======== ========
Shares used in per share calculation - basic 29,011 25,921 28,916 25,811
======== ======== ======== ========
Shares used in per share calculation - diluted 29,011 26,609 28,916 26,155
======== ======== ======== ========
</TABLE>
<PAGE>
CYLINK CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data; unaudited)
Three Months Ended
--------------------
March 29, March 28,
1998 1997
-------- --------
Restated
Revenue $ 8,062 $ 9,352
Cost of revenue 2,631 2,810
-------- --------
Gross profit 5,431 6,542
-------- --------
Operating expenses:
Research and development, net 3,045 3,018
Selling and marketing 5,573 2,782
General and administrative 1,478 1,900
Amortization of purchased intangibles 679 --
-------- --------
Total operating expenses 10,775 7,700
-------- --------
Loss from operations (5,344) (1,158)
Other income (expense) 152 1,073
-------- --------
Loss from continuing operations before income taxes (5,192) (85)
Benefit for income taxes 1,817 --
-------- --------
Loss from continuing operations (3,375) (85)
Income (loss) from discontinued operations, net of tax (259) 1,192
Gain on disposal of discontinued operations, net of tax 22,776 --
-------- --------
Net income $ 19,142 $ 1,107
======== ========
Earnings (loss) per share - basic:
Continuing operations $ (0.12) $ --
Discontinued operations 0.78 0.04
-------- --------
Net income (loss) $ 0.66 $ 0.04
======== ========
Earnings (loss) per share - diluted:
Continuing operations $ (0.12) $ --
Discontinued operations 0.78 0.04
-------- --------
Net income $ 0.66 $ 0.04
======== ========
Shares used in per share calculation - basic 28,820 25,701
======== ========
Shares used in per share calculation - diluted 28,820 25,701
======== ========
<PAGE>
CYLINK CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data; unaudited)
Year Ended December 31,
----------------------
1997 1996
--------- ---------
Restated
Revenue $ 47,690 $ 25,793
Cost of revenue 13,986 9,731
--------- ---------
Gross profit 33,704 16,062
--------- ---------
Operating expenses:
Research and development, net 12,488 8,198
Selling and marketing 16,036 9,475
General and administrative 8,422 5,963
Purchased in-process technology 63,920 --
Amortization of purchased intangibles 807 --
Employee severance costs -- 634
--------- ---------
Total operating expenses 101,673 24,270
--------- ---------
Loss from operations (67,969) (8,208)
Other income 3,014 2,686
--------- ---------
Loss from continuing operations before income taxes (64,955) (5,522)
Provision for income taxes -- --
--------- ---------
Loss from continuing operations (64,955) (5,522)
Income from discontinued operations, net of tax 3,210 6,719
--------- ---------
Net income (loss) $ (61,745) $ 1,197
========= =========
Earnings (loss) per share - basic:
Continuing operations $ (2.43) $ (0.23)
Discontinued operations 0.12 0.28
--------- ---------
Net income (loss) $ (2.31) $ 0.05
========= =========
Earnings (loss) per share - diluted:
Continuing operations $ (2.43) $ (0.23)
Discontinued operations 0.12 0.28
--------- ---------
Net income (loss) $ (2.31) $ 0.05
========= =========
Shares used in per share calculation - basic 26,703 24,412
========= =========
Shares used in per share calculation - diluted 26,703 24,412
========= =========
<PAGE>
<TABLE>
CYLINK CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands; unaudited)
<CAPTION>
Restated
-----------------------------------------
Sept. 27, June 28, March 29, Dec. 31,
1998 1998 1998 1997
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 49,241 $ 46,052 $ 58,078 $ 22,977
Accounts receivable, net 13,483 13,990 12,756 13,914
Note receivable 3,545 12,424 -- --
Inventories 9,826 8,419 6,935 6,224
Net assets of discontinued operations -- -- 12,424 11,299
Deferred income taxes 1,629 1,640 1,760 1,533
Other current assets 2,432 2,464 2,323 2,190
--------- --------- --------- ---------
Total current assets 80,156 84,989 94,276 58,137
Property and equipment, net 5,884 6,105 6,041 6,003
Acquired technology, goodwill and other intangibles 5,979 6,659 7,338 8,017
Notes receivable from employees 5,562 5,703 4,318 3,473
Other assets 411 3,469 3,989 925
--------- --------- --------- ---------
$ 97,992 $ 106,925 $ 115,962 $ 76,555
========= ========= ========= =========
Liabilities and Shareholders' Equity
Current liabilities:
Current portion of lease obligations and long-term debt $ 156 $ 194 $ 196 $ 210
Accounts payable 3,163 1,958 2,936 2,238
Accrued liabilities 8,984 8,542 6,505 6,194
Accrued liabilities related to discontinued operations 3,634 3,850 6,773 --
Income taxes payable -- 4,604 11,361 1,304
Deferred revenue 1,378 1,581 1,165 206
--------- --------- --------- ---------
Total current liabilities 17,315 20,729 28,936 10,152
--------- --------- --------- ---------
Capital lease obligations and long-term debt 164 178 215 256
--------- --------- --------- ---------
Deferred income taxes 13 13 13 13
--------- --------- --------- ---------
Shareholders' equity:
Preferred stock -- -- -- --
Common stock 291 290 289 287
Additional paid-in capital 122,564 122,442 121,575 120,092
Deferred compensation related to stock options (188) (208) (229) (250)
Cumulative translation adjustment (27) (62) (47) (63)
Retained earnings (accumulated deficit) (42,140) (36,457) (34,790) (53,932)
--------- --------- --------- ---------
Total shareholders' equity 80,500 86,005 86,798 66,134
--------- --------- --------- ---------
$ 97,992 $ 106,925 $ 115,962 $ 76,555
========= ========= ========= =========
</TABLE>
