<PAGE> 1
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 20, 1998
NETWORKS ASSOCIATES, INC.
(FORMERLY MCAFEE ASSOCIATES, INC.)
(Exact name of registrant as specified in its charter)
Delaware 000-20558 77-0316593
(State or other (Commission File Number) (I.R.S. Employer
jurisdiction of Identification No.)
incorporation)
2805 Bowers Avenue
Santa Clara, California 95051
(Address of principal executive offices)
(408) 988-3832
(Registrant's telephone number, including area code)
<PAGE> 2
ITEM 5. OTHER EVENTS
On January 20, 1998 Networks Associates, Inc. issued a press release
reporting revenue and earnings for the fourth quarter and the twelve months
ended December 31, 1997.
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Exhibits:
99.1 Press Release dated January 20, 1998.
<PAGE> 4
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.
NETWORKS ASSOCIATES, INC.
Dated: February 10, 1998 By:/s/ Prabhat K. Goyal
--------------------------------
Prabhat K. Goyal
Chief Financial Officer
<PAGE> 5
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<S> <C>
99.1 Press Release dated January 20, 1998.
</TABLE>
<PAGE> 1
[NETWORKS LETTERHEAD]
NETWORK ASSOCIATES REPORTS RECORD FOURTH QUARTER REVENUE
FOURTH QUARTER REVENUE RISES TO $173,305,000;
FOURTH QUARTER NET INCOME EXCLUSIVE OF ACQUISITION
AND NON-RECURRING CHARGES RISES TO $36,115,000
SANTA CLARA, Calif., Jan. 20, 1998 - Network Assoc. (NASDAQ: NETA), a leading
supplier of enterprise network security and management software, today reported
record revenue and earnings for the fourth quarter and twelve months ended
December 31, 1997 excluding costs related to the previously announced
acquisitions of Network General Corporation and Pretty Good Privacy, Inc. which
both closed in December 1997.
EARNINGS BEFORE CHARGES ASSOCIATED WITH THE
ACQUISITIONS OF NETWORK GENERAL AND PGP
Revenue for the fourth quarter reached $173,305,000, an increase of 39 percent
over revenues of $124,662,000(1) in the same period a year ago, restated for the
acquisition of Network General, which was accounted for as a pooling of
interests. Net income exclusive of acquisition and non-recurring charges for the
fourth quarter increased 26 percent to $36,115,000, or $0.49 per share, from
$28,643,000(1), or $0.39 per share in the fourth quarter of 1996.
Revenue for the twelve months ended December 31, 1997 was $612,193,000, an
increase of 45 percent over revenue of $421,794,000(1) reported for the previous
fiscal year. Net income exclusive of acquisition and non-recurring charges for
the year ended December 31, 1997 increased 43 percent to $131,584,000, or $1.81
per share, compared to net income of $92,130,000(1), or $1.28 per share
excluding acquisition charges in the previous year.
<TABLE>
<CAPTION>
Three Months Ended December 31, Twelve Months Ended December 31,
------------------------------- --------------------------------
1997 1996 1997 1996(1)
---- ---- ---- -------
<S> <C> <C> <C> <C>
Revenues $173,305,000 $124,662,000 $612,193,000 $421,794,000
Income Before Taxes $58,250,000 $44,811,000 $208,764,000 $146,063,000
Net Income $36,115,000 $28,643,000 $131,584,000 $92,130,000
Earnings Per Share $0.49 $0.39 $1.81 $1.28
</TABLE>
<PAGE> 2
REPORTED EARNINGS FOR THE FOURTH QUARTER OF 1997
In connection with the Network General and PGP acquisitions, the Company
incurred a one-time charge for acquisition and non-recurring costs which
resulted in a reported net loss for the fourth quarter of 1997 of $80,896,000,
or $1.16 per share, compared to net income of $28,643,000, or $0.39 per share
for the fourth quarter of 1996. After giving effect to acquisition and
non-recurring charges incurred in each year, the reported net loss for the year
ended December 31, 1997 was $28,356,000, or $0.41 per share, compared to net
income of $64,110,000(1), or $0.89 per share for the year ended December 31,
1996.
"In addition to closing the merger between McAfee and Network General and the
acquisition of PGP ahead of schedule in the fourth quarter, Network Associates
forged ahead to deliver record revenue and earnings for the quarter and the
year," said Bill Larson, CEO and Chairman of Network Associates. "The final
month of the quarter demonstrates the promise of the comprehensive McAfee,
Network General and PGP product offerings, encompassed in enterprise network
security and management solutions through an integrated suite strategy."
QUARTER HIGHLIGHTS
Network Associates was officially launched as the merger between McAfee
Associates and Network General closed ahead of schedule on December 1, 1997.
Network Associates also extended its enterprise network security and management
software product lines with the acquisition of the leading applied
cryptographic security solution provider, privately-held Pretty Good Privacy
("PGP").
Network Associates introduced four new product suites aimed at new and existing
corporate customers: the McAfee Total Virus Defense Suite ("TVD"), the PGP Total
Network Security Suite ("TNS"), the Sniffer (R) Total Network Visibility Suite
("TNV") and the McAfee Total ServiceDesk Suite ("TSD").
The TVD Suite delivers a multi-tiered approach to virus protection spanning
client, server and Internet gateway. In the fourth quarter, components of the
TVD Suite continued to accumulate industry awards and honors, including Secure
Computing Labs' Checkmark certification, the latest of several benchmark tests
where VirusScan overcame the most rigorous standards for virus detection,
Windows NT Magazine's "Editor's Choice" award, finalist in PC/Computing's MVP
awards, leading anti-virus technology for Windows NT by ENT magazine, top
honors from CNET and PC Today, PC World's "Best Buy", Secure Computing's "Best
Anti-Virus" and "Best Security Software", HomePC's "Editor's Choice" and Window
Sources' "Stellar Award" for SecureCast. Further, the TVD Suite was named the
top performer in CNET's Net security suites review in a head-to-head comparison
against Symantec's Norton AntiVirus 4.0 Deluxe, EMD's Armor97 Security Suite,
CyberMedia's GuardDog Deluxe and eSafe's Protect.
Extending its line of server and client virus protection, the TVD Suite
introduced GroupShield and GroupScan for Microsoft Exchange Server version 5.5,
offering the first native anti-virus solution for Microsoft Exchange clients
and servers. GroupShield protects Microsoft Exchange
<PAGE> 3
servers with around-the-clock virus-scanning, flexible alerting and powerful
"lights-out" administrative capabilities. GroupScan intercepts and scans
incoming messages at the client side, allowing users to encrypt messages
without sacrificing virus security. The installed base of GroupShield for
Microsoft Exchange and Lotus Notes surpassed three million users in its first
twelve months on the market.
The TNV Suite expanded its product offerings during the fourth quarter,
including the Sniffer(R) Decode Server as a cost-effective solution for network
professionals who perform technical support, training or development. The
Sniffer(R) Decode Server meets a critical need by making trace files available
to Technical Assistance Center ("TAC") engineers for analysis through a Web
Browser. The trace files document hard-to-solve problems and can be captured at
end user sites by a portable Sniffer(R) Network Analyzer and submitted for
in-depth analysis to TAC engineers. Also during the quarter, the HSSI
Sniffer(R) Network Analyzer was launched, the only Expert Analysis tool for
High-Speed Serial Interface links.
The TSD Suite added a new web-based Self ServiceDesk, an integration of
diagnostic and help-desk software designed to make desktop computers
"help-desk-ready", giving PC's "self-healing" capabilities which empower
employees to solve problems without calling the help desk. Self ServiceDesk is
designed exclusively for Microsoft(R) Internet Information Server, Microsoft's
comprehensive Web server solution, and represents an addition to the seamless
integration of Microsoft's SQL Server with the latest release of McAfee
HelpDesk announced in the third quarter of 1997.
The TNS Suite was launched with the acquisition of PGP, incorporating the PGP
public-key infrastructure, including the PGP Certificate Server, with the
Cybercop, Webwall and NetCrypto products, enabling confidential communications
and security across a corporate intranet, extranet or the public Internet.
With headquarters in Santa Clara, California, Network Associates, Inc., formed
by the merger of McAfee Associates and Network General, is a leading supplier
of enterprise network security and management solutions. Network Associates'
product offering includes four individual software suites, Total Virus Defense,
Total Network Security, Total Network Visibility and Total ServiceDesk, which
can be centrally managed from within the Network Associates' NetTools unified
management environment. For more information, Network Associates can be reached
at (408) 988-3832 or on the Internet at http://www.networkassociates.com.
(1) For purposes of the comparative operating data, Network General's audited
consolidated financial statements for the fiscal year ended March 31, 1997 and
for the twelve months ended December 31, 1997 have been combined with McAfee's
audited consolidated financial statements for the fiscal years ended December
31, 1996 and 1997, respectively. As a result, Network General's results for the
three month period ended March 31, 1997 are included in the consolidated
statement of operations data for both the twelve months ended December 31, 1996
and 1997. The information is not necessarily indicative of the operating
results or financial position that would have occurred if the Merger had been
consummated at the beginning of the periods indicated, nor is it necessarily
indicative of future operating results or financial position.
<PAGE> 4
NETWORK ASSOCIATES, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
December 31, 1997 December 31, 1996(1)
----------------- --------------------
(unaudited)
ASSETS
Cash and investments $ 356,560 $ 305,653
Accounts receivable, net 125,284 77,391
Inventories 8,379 5,307
Prepaid expenses and current
deferred taxes 52,774 26,113
Fixed assets, net 28,570 28,363
Long-term deferred taxes 7,247 7,719
Intangible and other assets,
net 23,117 7,210
----------------- --------------------
TOTAL ASSETS $ 601,931 $ 457,756
================= ====================
LIABILITIES
Accounts payable $ 18,439 $ 33,552
Accrued liabilities 141,083 36,360
Deferred revenue and taxes 82,650 58,921
----------------- --------------------
Total liabilities 242,172 128,833
----------------- --------------------
STOCKHOLDERS' EQUITY
Common stock 690 668
Additional paid in capital 191,431 139,583
Retained earnings 167,638 188,672
----------------- --------------------
Total stockholders' equity 359,759 328,923
----------------- --------------------
$ 601,931 $ 457,756
================= ====================
(1) For purposes of the comparative operating data, Network General's audited
consolidated financial statements for the fiscal year ended March 31, 1997 and
for the twelve months ended December 31, 1997 have been combined with McAfee's
audited consolidated financial statements for the fiscal years ended December
31, 1996 and 1997, respectively. As a result, Network General's results for the
three month period ended March 31, 1997 are included in the consolidated
statement of operations data for both the twelve months ended December 31, 1996
and 1997. This information is not necessarily indicative of the operating
results or financial position that would have occurred if the Merger had been
consummated at the beginning of the periods indicated, nor is it necessarily
indicative of future operating results or financial position.
<PAGE> 5
NETWORK ASSOCIATES, INC.
CONSOLIDATED INCOME STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Three Months Ended Twelve Months Ended
------------------------- -------------------------
December 31, December 31, December 31, December 31,
1997 1996 1997 1996(1)
------------ ------------ ------------ ------------
(unaudited)
<S> <C> <C> <C> <C>
Net Revenues $173,305 $124,662 $612,193 $421,794
Operating Costs & Expenses:
Cost of net revenues 31,967 21,972 108,216 76,913
Research & development 24,048 15,532 85,021 52,244
Marketing & sales 50,474 35,170 181,017 122,638
General & administrative 11,945 9,126 43,060 30,315
Amortization of
intangibles 270 874 858 3,169
Acquisition and
non-recurring
charges 132,608 -- 175,800 30,669
-------- -------- -------- --------
Total operating
costs and expenses 251,312 82,674 593,972 315,948
-------- -------- -------- --------
Income (loss) from
operations (78,007) 41,988 18,221 105,846
Other income 3,649 2,823 14,743 9,548
-------- -------- -------- --------
Income (loss) before
provision for
income taxes (74,358) 44,811 32,964 115,394
Provision for Income
Taxes 6,538 16,168 61,320 51,284
-------- -------- -------- --------
Net Income (Loss) $(80,896) $ 28,643 $(28,356) $ 64,110
======== ======== ======== ========
Fully Diluted Earnings
(Loss) Per Share $ (1.16) $ 0.39 $ (0.41) $ 0.89
======== ======== ======== ========
Shares Used 69.714 73,480 68,748 72,221
======== ======== ======== ========
</TABLE>
(1) For purposes of the comparative operating data, Network General's audited
consolidated financial statements for the fiscal year ended March 31, 1997 and
for the twelve months ended December 31, 1997 have been combined with McAfee's
audited consolidated financial statements for the fiscal years ended December
31, 1996 and 1997, respectively. As a result, Network General's results for the
three month period ended March 31, 1997 are included in the consolidated
statement of operations data for both the twelve months ended December 31, 1996
and 1997. This information is not necessarily indicative of the operating
results or financial position that would have occurred if the Merger had been
consummated at the beginning of the periods indicated, nor is it necessarily
indicative of future operating results or financial position.
