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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): January 28, 1999
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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.)
36 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)
20 Crosby Drive
Bedford, Massachusetts 01730
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(Former Name or Former Address, if Changed Since Last Report)
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ITEM 5. OTHER EVENTS.
On January 28, 1999, Security Dynamics Technologies, Inc. (the "Company")
reported financial results for the fourth quarter and year ended December 31,
1998. Revenue for the fourth quarter of 1998 increased 14% to $46.9 million,
from $41.1 million for the fourth quarter of 1997. Excluding certain
non-operating and one-time items, earnings for the quarter were $3.3 million
($0.08 per share on a diluted basis) compared to $7.1 million ($0.17 per share
on a diluted basis) for the same period in 1997. The reported net income for the
fourth quarter of 1998 was $12.6 million ($0.30 per share on a diluted basis),
compared to $4.0 million ($0.10 per share on a diluted basis) for the fourth
quarter of 1997. Revenue for the year ended December 31, 1998 increased 22% to
$171.3 million, from $140.6 million reported last year. Excluding certain
non-operating and one-time items, net income decreased 19% to $19.0 million
($0.45 per share on a diluted basis) compared to $23.6 million ($0.58 per share
on a diluted basis) in 1997. The reported net income for the year ended December
31, 1998 was $29.4 million ($0.69 per share on a diluted basis). This compares
to a reported net income of $17.0 million ($0.42 per share on a diluted basis)
for the year ended December 31, 1997.
The Company also announced that as a result of the merging of Security
Dynamics and RSA operations around the Keon product line, the Company plans to
take restructuring and other related charges of $5 million to $7 million in the
first quarter of 1999.
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.
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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: February 1, 1999 SECURITY DYNAMICS TECHNOLOGIES, INC.
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(Registrant)
By: /s/ Arthur W. Coviello, Jr.
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Arthur W. Coviello, Jr.
Executive Vice President and
Chief Operating Officer
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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 Annual and Fourth Quarter Results
BEDFORD, Mass., Jan. 28 /PRNewswire/ -- Security Dynamics Technologies, Inc.
(Nasdaq: SDTI - news) today reported financial results for the fourth quarter
and year ended December 31, 1998. Revenue for the fourth quarter of 1998
increased 14% to $46.9 million, from $41.1 million for the fourth quarter of
1997. Excluding certain non-operating and one-time items, earnings for the
quarter were $3.3 million ($0.08 per share on a diluted basis) compared to $7.1
million ($0.17 per share on a diluted basis) for the same period in 1997.
The reported net income for the fourth quarter of 1998 was $12.6 million ($0.30
per share on a diluted basis), compared to $4.0 million ($0.10 per share on a
diluted basis) for the fourth quarter of 1997. Revenue for the year ended
December 31, 1998 increased 22% to $171.3 million, from $140.6 million reported
last year. Excluding certain non-operating and one-time items, net income
decreased 19% to $19.0 million ($0.45 per share on a diluted basis) compared to
$23.6 million ($0.58 per share on a diluted basis) in 1997.
The reported net income for the year ended December 31, 1998 was $29.4 million
($0.69 per share on a diluted basis). This compares to a reported net income of
$17.0 million ($0.42 per share on a diluted basis) for the year ended December
31, 1997.
The fourth quarter results include additional, unplanned commission expenses of
$2.6 million or $0.04 per share related to sales compensation plans completed in
Q4. Consistent with stated objectives to renew focus on core product lines, in
the second half of 1998, the Company revised compensation plans to drive
revenue. The mix of sales in the channel, international and service provider
areas far exceeded expectations, thus accounting for the additional commission
expense and resulting impact on fourth quarter earnings per share.
"We are very pleased with our record revenue performance in the fourth quarter,
as both Security Dynamics and RSA finished the year strong," said Charles
Stuckey, chairman, president and CEO of Security Dynamics. "We look forward in
1999 to increased market penetration of our SecurID authentication products, as
well as the success of our new Keon PKI-based product family and new RSA
Australia subsidiary."
As a result of the merging of Security Dynamics and RSA operations around the
Keon product line, the company plans to take restructuring and other related
charges of $5 million to $7 million in the first quarter.
About Security Dynamics
Security Dynamics Technologies, Inc. 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
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than 4 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 400 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 Twelve Months Ended
December 31, December 31,
1998 1997(i) 1998 1997(i)
<S> <C> <C> <C> <C>
Revenue $ 46,915 $41,128 $171,334 $140,630
Gross profit(ii) 35,009 32,561 130,553 111,926
Operating expenses:
Research and development 7,772 6,271 30,221 20,970
Purchased research
and development(iii) 1,550 3,035 1,760 6,210
Marketing and selling 22,328 12,163 66,788 41,926
General and
administrative(iv) 5,121 4,528 19,007 17,171
Legal settlement(iii) -- -- 1,872 --
Merger and
integration(iii) -- (1,300) 2,600 5,700
Total operating
expenses 36,771 24,697 122,248 91,977
Operating income (1,762) 7,864 8,305 19,949
Interest income
and other 2,189 2,244 8,676 6,273
Gain/(loss) on sale
of marketable
securities(iii) -- (332) -- 4,264
Gain/(loss) on sale of
equity investment(iii) 29,449 -- 31,285 --
Gain from increase in
market value of equity
investment(iii) -- -- 11,976 --
Equity in loss from
operations of equity
investment(iii) (1,800) -- (4,187) --
Investment valuation
reserve (3,647) -- (3,647) --
Income before provision
for income taxes 24,429 9,776 52,408 30,486
Provision for income
taxes 11,882 5,645 23,571 13,324
Minority interests 42 (114) 578 (114)
Net income 12,589 4,017 29,415 17,048
Net income per share
- basic $ 0.31 $ 0.10 $ 0.72 $ 0.44
Net income per share
- diluted $ 0.30 $ 0.10 $ 0.69 $ 0.42
Weighted average number
of common shares
- basic 40,872 40,016 40,909 38,956
Weighted average number
of common shares
- diluted 41,797 41,667 42,497 40,648
</TABLE>
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Condensed Consolidated Balance Sheets
(in thousands)
<TABLE>
<CAPTION>
December 31, December 31,
1998 1997
<S> <C> <C>
Cash and marketable securities $158,236 $164,659
Accounts receivable, net 36,712 27,551
Total assets 272,536 233,975
Stockholders' equity 228,885 200,653
</TABLE>
(i) Restated to reflect the Merger with Intrusion Detection, Inc. in March
1998, accounted for as a pooling of interests.
(ii) Fourth quarter 1998 activity includes $2.3 million of non recurring
costs of terminating select hardware and VPN product lines, second quarter 1998
activity included a $3 million non-recurring cost of writing off a secure
messaging license.
(iii) Non-recurring items.
(iv) Fourth quarter 1998 activity includes $821k of non-recurring costs of
accelerated stock option compensation associated primarily with terminations and
headcount reductions.
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Condensed Consolidated Statements of Operations
Excluding non-recurring items
(in thousands, except per share data)
Three Months Ended Twelve Months Ended
December 31, December 31,
1998 1997 (i) 1998 1997 (i)
Revenue $46,915 $41,128 $171,334 $140,630
Gross profit 37,355 32,561 135,899 111,926
Operating expenses:
Research and development 7,772 6,271 30,221 20,970
Marketing and selling 22,328 12,163 66,788 41,926
General and administrative 4,300 4,528 18,186 17,171
Total operating expenses 34,400 22,962 115,195 80,067
Operating income 2,955 9,599 20,704 31,859
Interest income and other 2,190 1,806 8,676 5,811
Income before provision
for income taxes 5,145 11,405 29,380 37,670
Provision for income taxes 1,904 4,267 10,925 14,052
Minority interests 42 -- 578 --
Net income 3,283 7,138 19,033 23,618
Net income per
share - basic $0.08 $0.18 $0.47 $0.61
Net income per
share - diluted $0.08 $0.17 $0.45 $0.58
Weighted average number
of common shares
- basic 40,872 40,016 40,909 38,956
Weighted average number
of common shares
- diluted 41,797 41,667 42,497 40,648
Condensed Consolidated Balance Sheets
(in thousands)
December 31, December 31,
1998 1997
Cash and marketable securities $158,236 $164,659
Accounts receivable, net 36,712 27,551
Total assets 272,536 233,975
Stockholders' equity 228,885 200,653
(i) Restated to reflect the Merger with Intrusion Detection, Inc. in March
1998, accounted for as a pooling of interests.
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