Financials

2002 Second-Quarter Financial Statements

ENTRUST, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

IN ACCORDANCE WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES

(in thousands, except per share data)
Three Months Ended
June 30

2002
2001
(unaudited)
Revenues:
  License $11,905 $12,554
  Services and maintenance 14,601
 17,462
Total revenues 26,506
 30,016
Cost of revenues:
  License 1,023 1,207
  Services and maintenance 8,551
11,312
Total cost of revenues 9,574
12,519
Gross profit:
  Licenses 10,882 11,347
  Services and maintenance 6,050
6,150
Total gross profit 16,932 17,497

Sales and marketing
10,732
38,219
Research and development 6,476 8,345
General and administrative 3,893 9,363
Acquisition related costs:    
  Amortization of purchased product rights 284 1,377
  Amortization of goodwill and other purchased intangibles (a) -
 28,900
  Impairment of goodwill, purchased product rights and other purchased intangibles - 326,953
Restructuring charges (1,079) 65,511
Write-down of leaseholds and other long-lived assets -
 13,519
(Loss) from operations (3,374) (474,690)
Interest income 608 2,399
Loss from investment accounted for under the equity method (370) -
Write-down of long-term strategic investments (1,238)
(6,100)
(Loss) before income taxes (4,374) (478,391)
Provision for income taxes 400
396
Net (loss) $ (4,774)
 $ (478,787)

Weighted average common shares used:
  Basic 65,102 63,205
  Diluted 65,102 63,205

Net (loss) per share
  Basic $ (0.07) $ (7.58)
  Diluted $ (0.07) $ (7.58)

(a) For comparative purposes, the Company's net (loss), on a pro forma basis, assuming the cessation of goodwill amortization as required under SFAS No. 142 had been in effect from January 1, 2001, is as follows:
Reported net (loss) (4,774) (478,787)
SFAS No. 142 adjustment -
 28,900
Adjusted net (loss) (4,774)
(449,887)
Adjusted basic net (loss) per share (0.07)
(7.12)

ENTRUST, INC.

PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands)
Three Months Ended
June 30
2002
 2001
(unaudited)
Revenues:
  License $11,905 $12,554
  Services and maintenance 14,601
 17,462
Total revenues 26,506
30,016
Cost of revenues:
  License 1,023 1,207
  Services and maintenance 8,551
11,289
Total cost of revenues 9,574
12,496
Gross profit:
  Licenses 10,882 11,347
  Services and maintenance 6,050
6,173
Total gross profit 16,932 17,520

Sales and marketing
11,103
22,304
Research and development 6,476 8,345
General and administrative 3,773
3,767
(Loss) before interest and loss from investment (4,420) (16,896)
Interest income 608 2,399
(Loss) before income taxes (4,182) (14,497)
Provision for income taxes -
 -
Net (loss) $ (4,182)
 $ (14,497)

Weighted average common shares used:
  Basic 65,102 63,205
  Diluted 65,102 63,205

Net (loss) per share
  Basic $ (0.06) $ (0.23)
  Diluted $ (0.06) $ (0.23)

Note: The above unaudited pro forma condensed consolidated statement of operations exclude the effects of the following:

For all periods presented:
  • Amortization of purchased product rights.
  • Provision for income taxes adjusted to an effective tax rate of zero on losses and 30% on income
. For the three and six months ended June 30, 2001:
  • Amortization of goodwill and other purchased intangibles.
  • Impairment of purchased products rights, goodwill and other purchased intangibles ($327.0M).
  • Restructuring charges totalling $65.5M including: expenses associated with the workforce reduction ($13.5M), closure of facilities ($38.2M), and expenses related to the discontinuance of non-core products and programs ($13.8M).
  • Write-down of long-term strategic investments ($6.1M).
  • Special non-recurring charges including: workforce related expenses for restructuring-related employee relocations, CEO bonus and hiring fees ($4.1M), write-down of fixed assets and leasehold improvements related to facilities closures ($13.5M), expenses related to the write-off accounts receivable and increase in the allowance for doubtful accounts ($11.0M), and expenses and impairment of assets related to rebranding and expenses related to the discontinuance of non-core products and programs ($6.4M).
For the three and six months ended June 30, 2002:
  • Write-down of long-term strategic investments ($1.2M).
  • Reduction of restructuring charges of $1.1M to reflect negotiated savings and expense mitigation on contractual obligations.
  • Reduction of special non-recurring charges to reflect savings realized on expenses related to rebranding and the discontinuance of non-core products and programs ($0.3M)

ENTRUST, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)
June 30, 2002
 Dec 31, 2001
(unaudited)

ASSETS
Cash and marketable investments $146,288 $162,593
Accounts receivable, net of allowance for doubtful accounts 19,908 23,732
Other current assets 6,360 5,202
Property and equipment, net 15,683 17,390
Purchased product rights, net 2,270 2,838
Goodwill, net 6,436 6,436
Other purchased intangibles, net 4,750 4,750
Investment accounted for under the equity method 1,496 -
Other long-term assets, net 4,347
6,497
  Total assets $207,538
$229,438

LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable and accruals $22,484 $28,936
Accrued restructuring charges 37,366 46,988
Deferred revenue 17,538 17,553
Long-term liabilities 233
116
  Total liabilities 77,621 93,593
Shareholders' equity 129,917
135,845
  Total liabilities and shareholders' equity $207,538
$229,438
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