SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934. |
For the quarterly period ended June 30, 2003
OR
| ¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934. |
Commission File Number 0-24707
INET TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
| Delaware | 75-2269056 | |
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. employer identification no.) |
1500 North Greenville Avenue
Richardson, Texas 75081
(Address of principal executive offices, including zip code)
(469) 330-4000
(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 þ No ¨
Indicate by check mark whether the registrant is an “accelerated filer” (as defined in Exchange Act Rule 12b-2). Yes þ No ¨
Number of shares of common stock outstanding at August 1, 2003: 38,644,566
Inet Technologies, Inc.
| Page No. | ||||
| Part I—Financial Information |
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| Item 1. | Financial Statements |
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| Consolidated Balance Sheets | 3 | |||
| Consolidated Statements of Income | 4 | |||
| Consolidated Statement of Stockholders’ Equity | 5 | |||
| Consolidated Statements of Cash Flows | 6 | |||
| Notes to Consolidated Financial Statements | 7 | |||
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 13 | ||
| Item 3. | Quantitative and Qualitative Disclosures about Market Risk | 31 | ||
| Item 4. | Controls and Procedures | 31 | ||
| Part II—Other Information | ||||
| Item 2. | Changes in Securities and Use of Proceeds | 32 | ||
| Item 4. | Submission of Matters to a Vote of Security Holders | 32 | ||
| Item 6. | Exhibits and Reports on Form 8-K | 33 | ||
| Signatures | 33 | |||
2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
INET TECHNOLOGIES, INC.
(Unaudited)
(In thousands, except share data)
| June 30, 2003 |
December 31, 2002 |
|||||||
| ASSETS | ||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 162,312 | $ | 189,076 | ||||
| Trade accounts receivable, net of allowance for doubtful accounts of $507 at June 30, 2003 and $484 at December 31, 2002 |
13,660 | 10,211 | ||||||
| Unbilled receivables |
352 | 155 | ||||||
| Inventories |
6,769 | 7,458 | ||||||
| Deferred income taxes |
850 | 850 | ||||||
| Other current assets |
5,846 | 4,909 | ||||||
| Total current assets |
189,789 | 212,659 | ||||||
| Property and equipment, net |
13,392 | 15,215 | ||||||
| Other assets |
583 | 300 | ||||||
| Total assets |
$ | 203,764 | $ | 228,174 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities: |
||||||||
| Accounts payable |
$ | 2,716 | $ | 1,078 | ||||
| Accrued compensation and benefits |
2,961 | 4,113 | ||||||
| Deferred revenues |
23,056 | 18,323 | ||||||
| Income taxes payable |
2,486 | 1,953 | ||||||
| Other accrued liabilities |
3,129 | 4,733 | ||||||
| Total current liabilities |
34,348 | 30,200 | ||||||
| Deferred income taxes |
18 | 18 | ||||||
| Commitments and contingencies |
||||||||
| Stockholders’ equity: |
||||||||
| Preferred stock, $.001 par value: |
||||||||
| Authorized shares—25,000,000 |
||||||||
| Issued shares—None |
— | — | ||||||
| Common stock, $.001 par value: |
||||||||
| Authorized shares—175,000,000 Issued shares—47,159,643 at June 30, 2003 and 47,157,543 at December 31, 2002 |
47 | 47 | ||||||
| Additional paid-in capital |
75,413 | 75,075 | ||||||
| Unearned compensation |
(345 | ) | (407 | ) | ||||
| Retained earnings |
128,767 | 123,241 | ||||||
| Treasury stock, 8,723,435 common shares at June 30, 2003 and no common shares at December 31, 2002, at cost |
(34,484 | ) | — | |||||
| Total stockholders’ equity |
169,398 | 197,956 | ||||||
| Total liabilities and stockholders’ equity |
$ | 203,764 | $ | 228,174 | ||||
See accompanying notes to consolidated financial statements.
3
INET TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In thousands, except per share data)
| Three months ended June 30, |
Six months ended June 30, | |||||||||||||
| 2003 |
2002 |
2003 |
2002 | |||||||||||
| Revenues: |
||||||||||||||
| Product and license fees |
$ | 17,770 | $ | 19,233 | $ | 35,288 | $ | 40,236 | ||||||
| Services |
7,702 | 6,987 | 15,226 | 13,479 | ||||||||||
| Total revenues |
25,472 | 26,220 | 50,514 | 53,715 | ||||||||||
| Cost of revenues: |
||||||||||||||
| Product and license fees |
6,336 | 7,971 | 9,238 | 14,203 | ||||||||||
| Services |
3,303 | 3,307 | 7,470 | 6,465 | ||||||||||
| Total cost of revenues |
9,639 | 11,278 | 16,708 | 20,668 | ||||||||||
| Gross profit |
15,833 | 14,942 | 33,806 | 33,047 | ||||||||||
| Operating expenses: |
||||||||||||||
| Research and development |
7,257 | 7,294 | 14,942 | 15,750 | ||||||||||
| Sales and marketing |
3,608 | 4,757 | 7,123 | 8,864 | ||||||||||
| General and administrative |
2,061 | 2,118 | 4,480 | 4,138 | ||||||||||
| 12,926 | 14,169 | 26,545 | 28,752 | |||||||||||
| Income from operations |
2,907 | 773 | 7,261 | 4,295 | ||||||||||
| Other income (expense): |
||||||||||||||
| Interest income |
372 | 665 | 798 | 1,355 | ||||||||||
| Other income (expense) |
(125 | ) | 414 | (109 | ) | 234 | ||||||||
| 247 | 1,079 | 689 | 1,589 | |||||||||||
| Income before provision for income taxes |
3,154 | 1,852 | 7,950 | 5,884 | ||||||||||
| Provision for income taxes |
883 | 527 | 2,424 | 1,819 | ||||||||||
| Net income |
$ | 2,271 | $ | 1,325 | $ | 5,526 | $ | 4,065 | ||||||
| Earnings per common share: |
||||||||||||||
| Basic |
$ | 0.06 | $ | 0.03 | $ | 0.14 | $ | 0.09 | ||||||
| Diluted |
$ | 0.06 | $ | 0.03 | $ | 0.14 | $ | 0.09 | ||||||
| Weighted-average shares outstanding: |
||||||||||||||
| Basic |
38,400 | 46,888 | 39,392 | 46,863 | ||||||||||
| Diluted |
38,689 | 47,092 | 39,609 | 47,146 | ||||||||||
See accompanying notes to consolidated financial statements.
4
INET TECHNOLOGIES, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
(Unaudited)
(In thousands, except share data)
| Common Stock |
Additional |
Unearned |
Retained |
Treasury Stock |
Total Stockholders’ Equity |
|||||||||||||||||||||
| Shares |
Amount |
Shares |
Amount |
|||||||||||||||||||||||
| Balance at December 31, 2002 |
47,157,543 | $ | 47 | $ | 75,075 | $ | (407 | ) | $ | 123,241 | — | $ | — | $ | 197,956 | |||||||||||
| Repurchase of common stock |
— | — | — | — | — | 8,993,984 | (35,553 | ) | (35,553 | ) | ||||||||||||||||
| Issuance of common stock under employee stock option and stock purchase plans, including tax benefit of $181 |
2,100 | — | 338 | (109 | ) | — | (270,549 | ) | 1,069 | 1,298 | ||||||||||||||||
| Net income |
— | — | — | — | 5,526 | — | — | 5,526 | ||||||||||||||||||
| Amortization of restricted stock awards |
— | — | — | 171 | — | — | — | 171 | ||||||||||||||||||
| Balance at June 30, 2003 |
47,159,643 | $ | 47 | $ | 75,413 | $ | (345 | ) | $ | 128,767 | 8,723,435 | $ | (34,484 | ) | $ | 169,398 | ||||||||||
See accompanying notes to consolidated financial statements.