Network Associates Announces Fourth Quarter and Fiscal Year 1998 Results And Completion of SEC Review Process
Announces Preliminary First Quarter 1999 Results
SANTA CLARA, Calif., April 6 /PRNewswire/ -- Network Associates (Nasdaq: NETA), a
leading supplier of enterprise network security and management software, today announced
final results for the fourth quarter and twelve months ended December 31, 1998.
Revenue for the fourth quarter reached $272,191,000, an increase of 37 percent over
revenues of $198,127,000 in the same period a year ago. Net income exclusive of
amortization expense and acquisition and other related costs for the fourth quarter
increased to $71,921,000, or $0.50 per share, from $29,633,000 or $0.22 per share, in the
fourth quarter of 1997.
Revenue for the twelve months ended December 31, 1998 was $990,045,000, an increase of
35 percent over revenue of $735,692,000 reported for the previous fiscal year. Net
income exclusive of amortization expense and acquisition and other related costs for the
year ended December 31, 1998 increased 61 percent to $215,236,000, or $1.55 per share,
compared to net income of $133,957,000, or $1.02 per share, in the previous year.
Three Months Ended Twelve Months Ended
December 31 December 31
1998 1997 1998 1997
($000) ($000) ($000) ($000)
Revenues $272,191 $198,127 $990,045 $735,692
Income before Interest income
and expense, Taxes,
Amortization Expense and
Acquisition and other
related costs 96,206 35,231 298,764 185,265
Net income exclusive of
amortization expense and
acquisition and other
related costs 71,921 29,633 215,236 133,957
Earnings Per Share $0.50 $0.22 $1.55 $1.02
Net Income for the fourth quarter of 1998 reached $56,685,000, or $0.40 per share,
compared to net loss of ($60,344,000), or ($0.47) per share, for the fourth quarter of
1997. After giving effect to interest income and expense, taxes, amortization expense
and acquisition and other related costs in each year, the reported net income for Fiscal
Year 1998 was $36,438,000, or $0.26 per share, compared to net income of $10,639,000, or
$0.08 per share for Fiscal Year 1997.
These figures reflect the conclusion of discussions with the Securities and Exchange
Commission (SEC) regarding write-offs of in-process research and development (IPR&D) and
acquisition related charges. The write-offs of IPR&D were accounted for in accordance
with accepted industry standards at that time. Based on a subsequent re-evaluation of
these transactions as a result of new SEC guidance, the company decreased its IPR&D
write-offs by $169 million in fiscal year 1998 and $45 million in fiscal year 1997. Due
to the capitalization of the IPR&D, amortization expense increased to $43 million in 1998
and $13 million in 1997. In addition, adjustments to fiscal year 1998 and 1997 revenue
and expenses occurred due to the pooling of financial statements of regional distributors
and other reclassifications of certain acquisition related charges.
"1998 was a record year, and I'm proud of our employees for delivering on the
commitments we made," said Bill Larson, chairman, president and CEO of Network
Associates.
The Company announced that sales for the quarter ended March 31, 1999 are expected to
be between $245 million and $250 million. Sales in this range would most likely result
in net income before non-cash amortization charges being between $0.30 per share and
$0.32 per share. Factor's impacting Q1 include the slowdown in the enterprise software
market as a whole, changes in corporate buying patterns due to Year 2000 concerns, and a
lengthening sales cycle. The company expects to report complete first quarter results on
or about April 19, 1999.
"We believe that our long-term strategy of offering customers a best-of-breed network
security and management solution remains compelling and will carry Network Associates
into the year 2000 and beyond," added Larson.
The Company will host a conference call today at 5:30 p.m. Eastern Standard Time, 2:30
p.m. Pacific Standard Time to discuss its results. Participants should call 415-904-7355,
212-346-7466, reservation number 12105981.
With headquarters in Santa Clara, California, Network Associates, Inc. is a leading
supplier of enterprise network security and management software. Network Associates' Net
Tools Secure and Net Tools Manager suites offer best-of-breed, network security and
management solutions. Net Tools Secure and Net Tools Manager suites combine to create
Net Tools which centralizes these point solutions within an easy-to-use, integrated
systems management environment. For more information, Network Associates can be reached
at 408-988-3832 or on the Internet at nai.com.
The foregoing contains forward-looking statements within the meaning of Section 27A of
the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of
1934. Those statements are subject to known and unknown risks and uncertainties,
including but not limited to those contained in the Company's most recent public filings
that could cause anticipated results to vary, perhaps materially from those contained in
such forward looking statements. The statements regarding the Company's preliminary
first quarter net revenue, earnings per share and non-cash amortization charges are
forward looking unaudited results and actual results may differ due to, among other
factors, accounting adjustments made during the close of the quarter.
NETWORK ASSOCIATES, INC.
Consolidated Income Statements
(In Thousands, except per share data)
Three Months Ended Twelve Months Ended
Dec. 31 Dec. 31 Dec. 31 Dec. 31
1998 1997 1998 1997
(Unaudited) (Unaudited)
Net Revenues $272,191 $198,127 $990,045 $735,692
Operating Costs & Expenses:
Cost of net revenues 39,353 44,690 177,048 142,099
Research & development 33,258 29,020 135,475 103,051
Marketing & sales 84,623 66,715 294,812 222,194
General & administrative 18,751 22,471 83,946 83,083
Amortization of intangibles 15,236 4,263 43,182 12,866
Contingent Compensation
- Cinco -- 17,653 -- 17,653
Acquisition & non-recurring
charges -- 68,061 135,616 92,799
Total operating costs
and expenses 191,221 252,873 870,079 673,745
Income (loss) from operations 80,970 (54,746) 119,966 61,947
Other Income and Expense, Net 4,255 4,722 18,201 20,865
Income (loss) before
provision for income taxes 85,225 (50,025) 138,167 82,812
Provision for income taxes 28,540 10,320 101,729 72,173
Net income (loss) $ 56,685 $(60,345) $ 36,438 $ 10,639
Fully Diluted Earnings
(Loss) Per Share $0.40 $(0.47) $0.26 $0.08
Fully Diluted Shares Used 149,002 127,645 138,609 131,388
NETWORK ASSOCIATES, INC.
Consolidated Balance Sheets
(In thousands)
Dec. 31, 1998 Dec. 31, 1997
Final Final
(Unaudited) (Unaudited)
Assets
Cash & Investments $ 733,871 $ 417,795
Accounts Receivable, net 260,784 156,197
Prepaid Expenses and other current assets 59,554 42,882
Fixed Assets, net 54,489 48,328
Deferred Taxes 104,071 46,262
Intangibles & other long term assets, net 323,952 93,886
Total Assets $1,536,721 $ 805,350
Liabilities
Accounts Payable $20,881 $26,444
Accrued Liabilities 157,901 152,772
Deferred Revenue 192,598 127,422
Deferred Taxes 65,169 3,548
Long Term Debt & other liabilities 377,334 2,663
Total Liabilities 813,883 312,850
Stockholders' Equity
Common Stock 1,371 1,281
Additional Paid-in Capital 527,862 331,409
Other (1,534) 1,110
Retained Earnings (deficit) 195,139 158,701
Total Stockholders' Equity 722,838 492,501
$1,536,721 $ 805,350
/CONTACT: Julie Hawkins, 408-346-3575, or Jennifer Keavney, 408-346-3278, both of
Network Associates, Inc./
17:34 EDT
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