UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark one)
| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended March 31, 2003
or
| ¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number 0-33387
NETSCREEN TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
| Delaware |
77-0469208 | |
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification Number) |
805 11th Avenue
Building 3
Sunnyvale, California 94089
(Address of principal executive offices and zip code)
(408) 543-2100
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES x NO ¨
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). YES x NO ¨
As of April 30, 2003, 80,335,769 shares of the registrant’s common stock, $0.001 par value, were outstanding.
NETSCREEN TECHNOLOGIES, INC.
FORM 10-Q
For the quarterly period ended March 31, 2003
| Page | ||||
| Item 1. |
||||
| a. Condensed Consolidated Balance Sheets as of March 31, 2003 (Unaudited) and September 30, 2002 |
3 | |||
| 4 | ||||
| 5 | ||||
| d. Notes to Condensed Consolidated Financial Statements (Unaudited) |
6 | |||
| Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
15 | ||
| Item 3. |
34 | |||
| Item 4. |
35 | |||
| Item 1. |
36 | |||
| Item 2. |
36 | |||
| Item 3. |
36 | |||
| Item 4. |
36 | |||
| Item 5. |
37 | |||
| Item 6. |
37 | |||
| 38 | ||||
| 39 | ||||
2
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share amounts)
| March 31, 2003 |
September 30, 2002* |
|||||||
| (Unaudited) |
||||||||
| Assets |
||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ |
27,572 |
|
$ |
11,153 |
| ||
| Short-term investments |
|
266,698 |
|
|
238,711 |
| ||
| Restricted cash |
|
308 |
|
|
1,611 |
| ||
| Accounts receivable, net |
|
24,180 |
|
|
18,046 |
| ||
| Inventories |
|
2,363 |
|
|
2,249 |
| ||
| Other current assets |
|
6,317 |
|
|
5,231 |
| ||
| Total current assets |
|
327,438 |
|
|
277,001 |
| ||
| Property and equipment |
|
9,514 |
|
|
6,264 |
| ||
| Restricted cash |
|
694 |
|
|
— |
| ||
| Intangible assets |
|
5,270 |
|
|
5,759 |
| ||
| Goodwill |
|
57,281 |
|
|
56,807 |
| ||
| Other assets |
|
714 |
|
|
853 |
| ||
| Total assets |
$ |
400,911 |
|
$ |
346,684 |
| ||
| Liabilities and Stockholders’ Equity |
||||||||
| Current liabilities: |
||||||||
| Accounts payable |
$ |
5,939 |
|
$ |
5,027 |
| ||
| Accrued expenses |
|
12,769 |
|
|
11,452 |
| ||
| Accrued compensation |
|
9,309 |
|
|
6,909 |
| ||
| Accrued income taxes |
|
5,047 |
|
|
1,865 |
| ||
| Deferred revenue |
|
44,725 |
|
|
26,150 |
| ||
| Current portion of restructuring liabilities |
|
700 |
|
|
541 |
| ||
| Current portion of debt and capital lease obligations |
|
1,659 |
|
|
1,761 |
| ||
| Total current liabilities |
|
80,148 |
|
|
53,705 |
| ||
| Restructuring liabilities, less current portion |
|
2,264 |
|
|
2,577 |
| ||
| Long-term portion of debt and capital lease obligations |
|
662 |
|
|
1,513 |
| ||
| Commitments and contingencies |
||||||||
| Stockholders’ equity: |
||||||||
| Preferred stock, $0.001 par value: |
||||||||
| Authorized shares—10,000,000 at March 31, 2003 and September 30, 2002 |
||||||||
| Issued and outstanding shares: none at March 31, 2003 and September 30, 2002 |
|
— |
|
|
— |
| ||
| Common stock, $0.001 par value: |
||||||||
| Authorized shares—500,000,000 at March 31, 2003 and September 30, 2002 |
||||||||
| Issued and outstanding shares—79,912,526 and 77,893,007 at March 31, 2003 and September 30, 2002 |
|
80 |
|
|
78 |
| ||
| Additional paid-in capital |
|
470,560 |
|
|
464,524 |
| ||
| Accumulated deficit |
|
(123,447 |
) |
|
(132,550 |
) | ||
| Accumulated other comprehensive income |
|
423 |
|
|
501 |
| ||
| Deferred stock compensation |
|
(28,644 |
) |
|
(42,162 |
) | ||
| Stockholders’ notes receivable |
|
(1,135 |
) |
|
(1,502 |
) | ||
| Total stockholders’ equity |
|
317,837 |
|
|
288,889 |
| ||
| Total liabilities and stockholders’ equity |
$ |
400,911 |
|
$ |
346,684 |
| ||
* Derived from audited financial statements.
See accompanying notes.
3
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(in thousands, except per share amounts)
| Three Months Ended March 31, |
Six Months Ended March 31, |
|||||||||||||||
| 2003 |
2002 |
2003 |
2002 |
|||||||||||||
| Revenues: |
||||||||||||||||
| Product |
$ |
47,937 |
|
$ |
26,494 |
|
$ |
90,388 |
|
$ |
50,593 |
| ||||
| Maintenance and service |
|
10,405 |
|
|
5,543 |
|
|
19,024 |
|
|
10,417 |
| ||||
| Total revenues |
|
58,342 |
|
|
32,037 |
|
|
109,412 |
|
|
61,010 |
| ||||
| Cost of revenues: |
||||||||||||||||
| Product (1) (2) |
|
10,630 |
|
|
6,566 |
|
|
19,913 |
|
|
13,856 |
| ||||
| Maintenance and service (1) |
|
3,231 |
|
|
1,963 |
|
|
5,648 |
|
|
3,165 |
| ||||
| Total cost of revenues |
|
13,861 |
|
|
8,529 |
|
|
25,561 |
|
|
17,021 |
| ||||
| Gross margin |
|
44,481 |
|
|
23,508 |
|
|
83,851 |
|
|
43,989 |
| ||||
| Operating expenses: |
||||||||||||||||
| Research and development (1) (2) |
|
11,077 |
|
|
8,232 |
|
|
20,859 |
|
|
15,614 |
| ||||
| Sales and marketing (1) (2) |
|
20,037 |
|
|
14,990 |
|
|
40,199 |
|
|
29,591 |
| ||||
| General and administrative (1) |
|
4,858 |
|
|
4,196 |
|
|
9,049 |
|
|
8,434 |
| ||||
| Total operating expenses |
|
35,972 |
|
|
27,418 |
|
|
70,107 |
|
|
53,639 |
| ||||
| Income (loss) from operations |
|
8,509 |
|
|
(3,910 |
) |
|
13,744 |
|
|
(9,650 |
) | ||||
| Interest and other income, net |
|
1,004 |
|
|
955 |
|
|
2,067 |
|
|
1,285 |
| ||||
| Income (loss) before taxes |
|
9,513 |
|
|
(2,955 |
) |
|
15,811 |
||||||||