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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): October 12, 1998
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Security Dynamics Technologies, Inc.
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(Exact Name of Registrant as Specified in Charter)
Delaware
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(State or Other Jurisdiction of Incorporation)
000-25120 04-2916506
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(Commission File Number) (I.R.S. Employer Identification No.)
20 Crosby Drive
Bedford, Massachusetts 01730
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(Address of Principal Executive Offices) (Zip Code)
(781) 687-7000
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(Registrant's Telephone Number, Including Area Code)
Not Applicable
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(Former Name or Former Address, if Changed Since Last Report)
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ITEM 5. OTHER EVENTS.
On October 12, 1998, Security Dynamics Technologies, Inc. (the "Company")
reported financial results for the third quarter of 1998. Revenue for the third
quarter of 1998 increased 14% to $40.8 million, from $35.9 million for the third
quarter of 1997. Before certain non-operating and one-time items, earnings for
the quarter were $4.0 million ($0.10 per share on a diluted basis), compared to
$5.9 million ($0.15 per share on a diluted basis) for the same period in 1997.
Revenue for the nine months ended September 30, 1998 was $124.4 million, a 25%
increase over the same period last year. Net income, excluding certain
non-operating and one-time items, decreased 4% to $15.8 million, or $0.38 per
diluted share, compared to $16.5 million, or $0.40 per diluted share, in the
first nine months of 1997. Reported net income for the first nine months of 1998
was $16.8 million, a 29% increase over the same period last year.
The Company also announced that its Board of Directors has authorized the
Company to repurchase up to 4 million shares of its common stock over the next
12 months. The Company believes that Security Dynamics' stock is significantly
undervalued, and therefore that the repurchase of common stock represents a
highly attractive investment opportunity. The timing and amount of shares
repurchased will be determined by the Company's management based on its
evaluation of market and economic conditions. The Company reported that the
repurchased shares will be used for the Company's stock option plans, employee
stock purchase and other stock benefit plans, and for general corporate
purposes.
The full text of the Company's press release is filed as Exhibit 99 to this
Current Report on Form 8-K and is incorporated herein by reference.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(c) EXHIBITS.
Exhibit No. Description
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99 Press Release
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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.
Date: October 13, 1998 SECURITY DYNAMICS TECHNOLOGIES, INC.
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(Registrant)
By: /s/ Marian G. O'Leary
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Marian G. O'Leary
Senior Vice President, Finance
Chief Financial Officer and Treasurer
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EXHIBIT INDEX
Exhibit No. Description
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99 Press Release
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EXHIBIT 99
Security Dynamics Reports Third Quarter Results
Company Announces Share Repurchase Program
BEDFORD, Mass., Oct. 12 -- Security Dynamics Technologies, Inc. (Nasdaq: SDTI)
today reported financial results for the third quarter of 1998. Revenue for the
third quarter of 1998 increased 14% to $40.8 million, from $35.9 million for the
third quarter of 1997. Before certain non- operating and one-time items,
earnings for the quarter were $4.0 million ($0.10 per share on a diluted basis),
compared to $5.9 million ($0.15 per share on a diluted basis) for the same
period in 1997.
Security Dynamics also announced today that its Board of Directors has
authorized the Company to repurchase up to 4 million shares of its common stock
over the next 12 months. The Company believes that Security Dynamics' stock is
significantly undervalued, and therefore that the repurchase of common stock
represents a highly attractive investment opportunity. The timing and amount of
shares repurchased will be determined by the Company's management based on its
evaluation of market and economic conditions. The Company reported that the
repurchased shares will be used for the Company's stock option plans, employee
stock purchase and other stock benefit plans, and for general corporate
purposes.
Reported net income for the third quarter of 1998 was $3.2 million ($0.08 per
share on a diluted basis). The Company recorded a non-operating gain of $1.8
million ($1.2 million after taxes) resulting from the sale of a portion of the
Company's investment in VeriSign, Inc. The gain was partially offset by a loss
of $1.2 million ($0.8 million after taxes) from the Company's proportionate
share of VeriSign's loss for the second quarter of 1998. In addition, the
Company also incurred a one-time, non-cash charge of $1.9 million ($1.2 million
after taxes) relating to settlement of threatened litigation in connection with
the Company's acquisition of Intrusion Detection Inc.
Revenue for the nine months ended September 30, 1998 was $124.4 million, a 25%
increase over the same period last year. Net income, excluding certain
non-operating and one-time items, decreased 4% to $15.8 million, or $0.38 per
diluted share, compared to $16.5 million, or $0.40 per diluted share, in the
first nine months of 1997. Reported net income for the first nine months of 1998
was $16.8 million, a 29% increase over the same period last year.
"We are pleased with our progress and performance in the third quarter, and
expect that in the fourth quarter we will continue to make progress in
positioning the company for future growth," said Charles R. Stuckey, Jr.,
chairman, president and CEO of Security Dynamics. "In light of the recent
substantial decline in the price of the Company's common stock, the Board of
Directors believes that the repurchase of the Company's shares at this time
represents an excellent investment opportunity."
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About Security Dynamics
Security Dynamics Technologies, Inc. (Nasdaq: SDTI - news) is a leading provider
of enterprise network and data security solutions that help companies conduct
business securely, protect corporate information assets and facilitate
business-to-business electronic commerce. With more than 3 million users of its
SecurID(R) authentication technology, Security Dynamics is the world leader in
two-factor user identification and authentication. RSA Data Security, Inc., a
wholly owned subsidiary of Security Dynamics, is a leading supplier of software
components that secure electronic data, with more than 300 million of copies of
RSA encryption and authentication software and technologies installed worldwide.
RSA technologies are part of existing and proposed standards for the Internet
and World Wide Web, ISO, ITU-T, ANSI, IEEE, and business, financial and
electronic commerce networks around the globe. Security Dynamics and RSA can be
found on the World Wide Web at http://www.securitydynamics.com and
http://www.rsa.com, respectively.
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Condensed Consolidated Statements of Operations
(in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1998 1997 (i) 1998 1997 (i)
<S> <C> <C> <C> <C>
Revenue $40,801 $35,928 $124,419 $99,502
Gross Profit (ii) 32,435 29,033 95,545 79,365
Operating expenses:
Research and
development 7,811 5,753 22,448 14,699
Purchased research and
development (iii) -- 3,175 210 3,175
Marketing and selling 16,204 10,593 44,459 29,763
General and
administrative 4,226 4,434 13,886 12,643
Threatened litigation
settlement (iii) 1,872 -- 1,872 --
Merger and
integration (iii) -- 7,000 2,600 7,000
Total operating
expenses 30,113 30,955 85,475 67,280
Operating income 2,322 (1,922) 10,070 12,085
Interest income
and other 1,993 1,272 6,486 4,031
Gain on sale of
marketable
securities (iii) -- 4,399 -- 4,596
Gain on sale of equity
investment (iii) 1,836 -- 1,836 --
Gain from increase
in market value
of equity
investments (iii) -- -- 11,976 --
Equity in loss
from operations
of equity
investment (iii) (1,214) -- (2,387) --
Income before
provision for
income taxes 4,937 3,749 27,981 20,712
Provision for
income taxes 1,827 1,461 11,691 7,679
Minority interests 78 -- 535 --
Net Income 3,188 2,288 16,826 13,033
Net income per share
- basic $0.08 $0.06 $0.41 $ 0.34
</TABLE>
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<TABLE>
<S> <C> <C> <C> <C>
Net income per share
- diluted $0.08 $0.06 $0.40 $ 0.32
Weighted average
number of
common shares
- basic 41,186 38,629 40,958 38,326
Weighted average
number of
common shares
- diluted 41,801 40,448 42,007 40,722
</TABLE>
<TABLE>
Condensed Consolidated Balance Sheets
(in thousands)
<CAPTION>
September 30, December 31,
1998 1997
<S> <C> <C>
Cash and marketable
securities $ 153,705 $164,659
Accounts receivable, net 30,635 27,551
Total Assets 257,199 233,975
Stockholders' equity 219,465 200,653
</TABLE>
(i) Restated to reflect the Merger with Intrusion Detection, Inc. in March
1998.
(ii) Activity for the nine months ended September 30, 1998 is net of $3.0
million non-recurring cost of writing off a secure messaging license in
June 1998.
(iii) Non-operating items.
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<TABLE>
Condensed Consolidated Statements of Operations
Excluding non-recurring items
(in thousands, except per share data)
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1998 1997(i) 1998 1997(i)
<S> <C> <C> <C> <C>
Revenue $40,801 $35,928 $124,419 $99,502
Gross Profit 32,435 29,034 98,545 79,365
Operating expenses:
Research and
development 7,811 5,753 22,448 14,699
Marketing and
selling 16,204 10,593 44,459 29,763
General and
administrative 4,226 4,434 13,886 12,642
Total operating
expenses 28,241 20,780 80,793 57,104
Operating income 4,194 8,254 17,752 22,261
Interest income
and other 1,993 1,272 6,435 4,005
Income before
provision for
income taxes 6,187 9,526 24,182 26,266
Provision for
income taxes 2,289 3,620 8,968 9,785
Minority interests 78 -- 536 --
Net Income 3,976 5,906 15,754 16,481
Net income per share
- basic $ 0.10 $0.15 $ 0.38 $ 0.43
Net income per share
- diluted $ 0.10 $0.15 $ 0.38 $ 0.40
Weighted average
number of
common shares
- basic 41,186 38,629 40,958 38,326
Weighted average
number of
common shares
- diluted 41,801 40,448 42,007 40,722
</TABLE>
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<TABLE>
Condensed Consolidated Balance Sheets
(in thousands)
<CAPTION>
September 30, December 31,
1998 1997
<S> <C> <C>
Cash and marketable
securities $153,705 $164,659
Accounts receivable, net 30,635 27,551
Total Assets 257,199 233,975
Stockholders' equity 219,465 200,653
</TABLE>
(i) Restated to reflect the Merger with Intrusion Detection, Inc. in March 1998.
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