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 December 31, 2002
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 office 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 January 31, 2003, 79,372,441 shares of the Registrant’s common stock, $0.001 par value, were outstanding.
NETSCREEN TECHNOLOGIES, INC.
FORM 10-Q
For the quarterly period ended December 31, 2002
| Page | ||||
| PART I—FINANCIAL INFORMATION | ||||
| Item 1. |
Financial Statements: |
|||
| a. Condensed Consolidated Balance Sheets as of December 31, 2002 (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 |
13 | ||
| Item 3. |
29 | |||
| Item 4. |
29 | |||
| PART II—OTHER INFORMATION |
||||
| Item 1. |
31 | |||
| Item 2. |
31 | |||
| Item 3. |
31 | |||
| Item 4. |
31 | |||
| Item 5. |
31 | |||
| Item 6. |
31 | |||
| 32 | ||||
2
PART I—FINANCIAL INFORMATION
Item 1. Financial Statements
NETSCREEN TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share amounts)
| December 31, |
September 30, |
|||||||
| 2002 |
2002* |
|||||||
| (Unaudited) |
||||||||
| Assets |
||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ |
15,681 |
|
$ |
11,153 |
| ||
| Short-term investments |
|
257,654 |
|
|
238,711 |
| ||
| Restricted cash |
|
746 |
|
|
1,611 |
| ||
| Accounts receivable, net |
|
19,675 |
|
|
18,046 |
| ||
| Inventories |
|
1,796 |
|
|
2,249 |
| ||
| Other current assets |
|
6,289 |
|
|
5,231 |
| ||
| Total current assets |
|
301,841 |
|
|
277,001 |
| ||
| Property and equipment |
|
7,398 |
|
|
6,264 |
| ||
| Restricted cash |
|
693 |
|
|
— |
| ||
| Intangible assets |
|
5,515 |
|
|
5,759 |
| ||
| Goodwill |
|
57,281 |
|
|
56,807 |
| ||
| Other assets |
|
686 |
|
|
853 |
| ||
| Total assets |
$ |
373,414 |
|
$ |
346,684 |
| ||
| Liabilities and Stockholders’ Equity |
||||||||
| Current liabilities: |
||||||||
| Accounts payable |
$ |
5,331 |
|
$ |
5,027 |
| ||
| Accrued expenses |
|
12,530 |
|
|
11,452 |
| ||
| Accrued compensation |
|
7,020 |
|
|
6,909 |
| ||
| Accrued income taxes |
|
4,682 |
|
|
1,865 |
| ||
| Deferred revenue |
|
35,300 |
|
|
26,150 |
| ||
| Current portion of restructuring liabilities |
|
679 |
|
|
541 |
| ||
| Current portion of debt and capital lease obligations |
|
1,623 |
|
|
1,761 |
| ||
| Total current liabilities |
|
67,165 |
|
|
53,705 |
| ||
| Restructuring liabilities, less current portion |
|
2,403 |
|
|
2,577 |
| ||
| Long-term portion of debt and capital lease obligations |
|
1,085 |
|
|
1,513 |
| ||
| Commitments and contingencies |
||||||||
| Stockholders’ equity: |
||||||||
| Preferred stock, $0.001 par value: |
||||||||
| Authorized shares—10,000,000 at December 31, 2002 and September 30, 2002 |
||||||||
| Issued and outstanding shares: none at December 31, 2002 and September 30, 2002 |
|
— |
|
|
— |
| ||
| Common stock, $0.001 par value: |
||||||||
| Authorized shares—500,000,000 at December 31, 2002 and September 30, 2002 Issued and outstanding shares—78,936,465 and 77,893,007 at December 31, 2002 and September 30, 2002 |
|
79 |
|
|
78 |
| ||
| Additional paid-in capital |
|
468,449 |
|
|
464,524 |
| ||
| Accumulated deficit |
|
(129,338 |
) |
|
(132,550 |
) | ||
| Accumulated other comprehensive income |
|
450 |
|
|
501 |
| ||
| Deferred stock compensation |
|
(35,467 |
) |
|
(42,162 |
) | ||
| Stockholders’ notes receivable |
|
(1,412 |
) |
|
(1,502 |
) | ||
| Total stockholders’ equity |
|
302,761 |
|
|
288,889 |
| ||
| Total liabilities and stockholders’ equity |
$ |
373,414 |
|
$ |
346,684 |
| ||
* Derived from audited financial statements.
See accompanying notes.
3
NETSCREEN TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(in thousands, except per share amounts)
| Three Months Ended December 31, |
||||||||
| 2002 |
2001 |
|||||||
| Revenues: |
||||||||
| Product |
$ |
42,451 |
|
$ |
24,099 |
| ||
| Maintenance and service |
|
8,619 |
|
|
4,874 |
| ||
| Total revenues |
|
51,070 |
|
|
28,973 |
| ||
| Cost of revenues: |
||||||||
| Product (1) (2) |
|
9,283 |
|
|
7,290 |
| ||
| Maintenance and service (1) |
|
2,417 |
|
|
1,202 |
| ||
| Total cost of revenues |
|
11,700 |
|
|
8,492 |
| ||
| Gross margin |
|
39,370 |
|
|
20,481 |
| ||
| Operating expenses: |
||||||||
| Research and development (1) (2) |
|
9,782 |
|
|
7,382 |
| ||
| Sales and marketing (1) (2) |
|
20,162 |
|
|
14,601 |
| ||
| General and administrative (1) |
|
4,191 |
|
|
4,238 |
| ||
| Total operating expenses |
|
34,135 |
|
|
26,221 |
| ||
| Income (loss) from operations |
|
5,235 |
|
|
(5,740 |
) | ||
| Interest and other income, net |
|
1,063 |
|
|
330 |
| ||
| Income (loss) before taxes |
|
6,298 |
|
|
(5,410 |
) | ||
| Provision for income taxes |
|
(3,086 |
) |
|
(300 |
) | ||
| Net income (loss) |
|
3,212 |
|
|
(5,710 |
) | ||
| Deemed dividends on Series E and F redeemable convertible preferred stock |
|
— |
|
|
(28,743 |
) | ||
| Net income (loss) applicable to common stockholders |
$ |
3,212 |
|
$ |
(34,453 |
) | ||
| Basic net income (loss) per share applicable to common stockholders |
$ |
0.04 |
|
$ |
(1.25 |
) | ||
| Shares used in computing basic net income (loss) applicable to common stockholders |
|
77,003 |
|
|
27,569 |
| ||
| Diluted net income (loss) per share applicable to common stockholders |
$ |
0.04 |
|
$ |
(1.25 |
) | ||
| Shares used in computing diluted net income (loss) applicable to common stockholders |
|
82,893 |
|
|
27,569 |
| ||
| (1) Includes stock-based compensation of the following: |
||||||||
| Cost of product revenues |
$ |
411 |
|
$ |
410 |
| ||
| Cost of maintenance and service revenues |
|
277 |
|
|
230 |
| ||
| Research and development |
|
1,983 |
|
|
1,820 |
| ||
| Sales and marketing |
|
2,697 |
|
|
2,828 |
| ||
| General and administrative |
|
724 |
|
| ||||