-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, BwsYA3FA0IAxxtxGcYGD7C3XRl1HUA9gKSzegJg6De9scjAfsWJmlveqB7phgfj4 uQMkbthzpicDPQgmKSCopA== 0001047469-99-001699.txt : 19990122 0001047469-99-001699.hdr.sgml : 19990122 ACCESSION NUMBER: 0001047469-99-001699 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990120 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19990121 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ODS NETWORKS INC CENTRAL INDEX KEY: 0000736012 STANDARD INDUSTRIAL CLASSIFICATION: COMPUTER COMMUNICATIONS EQUIPMENT [3576] IRS NUMBER: 751911917 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 000-20191 FILM NUMBER: 99509369 BUSINESS ADDRESS: STREET 1: 1101 E ARAPAHO ROAD CITY: RICHARDSON STATE: TX ZIP: 75081 BUSINESS PHONE: 9722346400 MAIL ADDRESS: STREET 1: 1101 E ARAPAHO ROAD CITY: RICHRICHARDSON STATE: TX ZIP: 75081 FORMER COMPANY: FORMER CONFORMED NAME: OPTICAL DATA SYSTEMS INC DATE OF NAME CHANGE: 19950517 8-K 1 FORM 8-K SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------ FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported): January 20, 1999 ---------------------------- ODS NETWORKS, INC. - ------------------------------------------------------------------------------- (Exact Name of Registrant as Specified in Its Charter) Delaware - ------------------------------------------------------------------------------- (State of Other Jurisdiction of Incorporation) 000-20191 75-1911917 - ------------------------------------------------------------------------------- (Commission File Number) (IRS Employer Identification No.) 1101 East Arapaho Road, Richardson, Texas 75081 - ------------------------------------------------------------------------------- (Address of Principal Executive Offices) (Zip Code) (972) 234-6400 - ------------------------------------------------------------------------------- (Registrant's Telephone Number, Including Area Code) N/A - ------------------------------------------------------------------------------- (Former Name or Former Address, if Changed Since Last Report) ITEM 5. OTHER EVENTS. On January 20, 1999, ODS Networks, Inc., a Delaware corporation (the "Company"), announced results for the fourth quarter and year ended December 31, 1998, as set forth in a press release of the Company dated January 20, 1999 attached hereto as Exhibit 99.1 and incorporated herein by reference. The financial results include the costs of the strategic restructuring announced during the fourth quarter of 1998. In addition, the Company announced the restatement of its results of operations for the second quarter of fiscal year 1998 to reduce the charge for in-process research and development acquired in connection with the acquisition of Essential Communication Corporation, based on the new methodology set forth by the Staff of the Securities and Exchange Commission in its letter dated September 15, 1998 to the American Institute of Certified Public Accountants. ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS. (c) EXHIBITS. 99.1 Text of press release of the Registrant, dated January 20, 1999. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. ODS NETWORKS, INC. Dated: January 20, 1999 By: /s/ Timothy W. Kinnear -------------------------------- Timothy W. Kinnear, Chief Operating Officer 2 EXHIBIT INDEX Exhibit No. Description of Exhibit - ----------- ---------------------- 99.1 Text of press release of the Registrant, dated January 20, 1999. EX-99.1 2 EXHIBIT 99.1 CONTACTS: MEDIA CONTACT: INVESTOR CONTACT: Dru Popper-Lopez Charleigh Shayne Director, Marketing Director, Investor Relations (972) 664-8040 (972) 664-8061 ODS NETWORKS, INC. ANNOUNCES FOURTH QUARTER AND ANNUAL RESULTS Richardson, Texas - January 20, 1999 - ODS Networks, Inc. (NASDAQ: ODSI), ("ODS"), today announced its results for the fourth quarter and year ended December 31, 1998. Net sales for the year ended December 31, 1998 were $74.6 million, compared with $92.3 million in the preceding year. ODS reported a net loss of $25.8 million, or a loss per share of $1.50, for the year ended December 31, 1998 compared with a net loss of $4.9 million, or a loss per share of $0.30, for the preceding year. Net sales for the fourth quarter of 1998 were $12.8 million, compared with $18.1 million for the fourth quarter of 1997. ODS reported a net loss of $17.0 million, or a loss per share of $0.92, for the fourth quarter of 1998 compared with a net loss of $3.5 million, or a loss per share of $0.21, for the fourth quarter of 1997. The net loss reported for the year and the quarter ended December 31, 1998 include several charges related to the company's strategic restructuring which was announced on December 31, 1998. The strategic restructuring plans are designed to integrate the businesses acquired by ODS in 1998 and to focus ODS' efforts on high-performance network and data security solutions. During the fourth quarter, the company recorded a $6.7 million charge to cost of sales to write down the value of inventory associated with older technologies and a $3.5 million restructuring charge to write off the value of certain fixed assets which are to be disposed of. The company also recorded a $0.4 million restructuring charge for severance pay related to the fourth quarter reduction of its professional staff by approximately 45 positions and its manufacturing operations staff by approximately 72 positions. Further, during the fourth quarter, the company recorded a $1.0 million charge to write off its investment in an affiliated company. In May of 1998, the company acquired Essential Communication Corporation ("Essential") and recorded a $5.3 million charge for acquired in-process research and development. Although the company reported its second quarter results, including the Essential acquisition, in accordance with established accounting practice and the valuation provided by an independent appraisal, the company has evaluated an adjustment of the amount originally allocated to acquired in-process research and development to reflect the new methodology set forth in the September 15, 1998 letter from the SEC Staff to the American Institute of Certified Public Accountants. As a result of that evaluation, the company restated its results of operations for the second quarter of 1998 to reduce the charge for acquired in-process research and development to $2.3 million based on the new methodology set forth by the SEC Staff, and it reduced the loss reported in the second quarter and for the year by $3.0 million. ODS Fourth Quarter 1998 Results Page 2 of 5 The company's income tax benefit for the year ended December 31, 1998 primarily reflects the amount that ODS will recover as a refund of income taxes paid by the company in prior years. The company did not record an income tax benefit as of December 31, 1998 related to the net operating losses which can be carried forward to offset taxable income in future years. Ward Paxton, chairman, president and CEO of ODS, said, "Sales for 1998 and our performance were impacted by several factors including the declining market for modular shared media hubs, intense competition in the local area network market, and a reduction of sales to customers located in Asia." Paxton added, "To improve our performance, we have taken steps designed to focus on key growth opportunities such as the high-performance network and data security markets. The acquisitions of Essential and the CMDS Division of Science Applications International Corporation represent key components of ODS' strategy to provide unique, high-performance network and data security solutions. Our recent restructuring, which was announced in December, is a key step in our efforts to efficiently integrate these newly-acquired businesses and maintain our leading-edge technology position in our target market segments." ODS completed two key acquisitions in 1998, demonstrating the company's strategy to pursue the high performance network and data security market segments. In May of 1998, the company acquired Essential, a leader in high performance networking technology. In January of 1999, Essential began shipping the ESN-10000 switch based on the world's fastest networking technology standard, capable of moving data at more than six times the speed of Gigabit Ethernet. In September of 1998, ODS acquired specific assets and technologies of the CMDS (Computer Misuse and Detection System) Division of Science Applications International Corporation (SAIC). In January of 1999, ODS introduced CMDS 4.0, its next generation computer misuse and intrusion detection system. CMDS 4.0 is exceptionally scalable and incorporates an adaptable expert system to support the varying intrusion detection and computer misuse requirements of small businesses and large corporations to ISPs and government agencies. In addition, CMDS is highly complimentary to ODS' SecureCom and CryptoWatch family of data security products. "We are entering 1999 with a 15-year record of providing leading technical solutions and customer service to notable customers, a solid balance sheet and a reduced cost structure," stated Tim Kinnear, chief operating officer of ODS. "With our recent completion of the industry's fastest network switch and the introduction of our next generation security software, we are executing our strategy to aggressively pursue the growth opportunities in the high-performance network and data security markets," concluded Kinnear. ODS Fourth Quarter 1998 Results Page 3 of 5 ABOUT ODS NETWORKS, INC. ODS Networks, Inc. is a leading provider of high-performance network and data security solutions. ODS products are used worldwide by government agencies and private and public companies. ODS provides leading edge software and hardware solutions that address the network's most demanding bandwidth and security challenges. Additional information about ODS is available at http://www.ods.com. This release, other than historical information, includes forward-looking statements with respect to achieving corporate objectives, implementing corporate strategies and restructuring programs, completing the integration of the companies acquired during 1998, reducing costs, and certain other matters. These statements are made under the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995 and involve risks and uncertainties which could cause actual results to differ materially from those in the forward-looking statements, including but not limited to the following: the difficulties and uncertainties in successfully developing and introducing new products, the ability to manage successfully the restructuring programs discussed above, the impact of changing economic conditions, business conditions in the networking industry, the ability to manage acquisitions effectively, the impact of market peers and their products as well as risks concerning future technology and others identified in the Company's Annual Report on Form 10-K, Quarterly Reports on Forms 10-Q and other Securities and Exchange Commission filings. These filings can be obtained by contacting ODS Investor Relations. ODS is a registered trademark of ODS Networks, Inc. InfiniteSwitch, LANBlazer, CMDS, SecureCom and CryptoWatch are trademarks of ODS Networks, Inc. All other trademarks are the property of their respective owners. (FINANCIAL TABLES FOLLOW) ODS Fourth Quarter 1998 Results Page 4 of 5 ODS NETWORKS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands except par value amounts)
DECEMBER 31, DECEMBER 31, 1998 1997 ------------ ------------ ASSETS CURRENT ASSETS: Cash and cash equivalents $16,791 $17,911 Short term investments 4,760 14,667 Accounts receivable, net of allowance for doubtful accounts of $880 in 1998 and $758 in 1997 6,265 8,668 Income taxes receivable 4,749 3,159 Inventories 9,262 14,671 Deferred tax assets - 1,721 Other assets 759 1,221 ------- ------- TOTAL CURRENT ASSETS 42,586 62,018 Property and equipment, net 7,627 11,836 Long term investments - 3,168 Intangibles, net 10,614 - Equity investments 700 - Other assets 183 156 ------- ------- TOTAL ASSETS $61,710 $77,178 ------- ------- ------- ------- LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable $ 3,345 $ 5,381 Accrued expenses and deferred revenue 7,478 4,790 ------- ------- TOTAL CURRENT LIABILITIES 10,823 10,171 Deferred tax liabilities 1,361 628 Capital lease obligations 20 - STOCKHOLDERS' EQUITY: Preferred stock, $.01 par value: Authorized shares 5,000; No shares issued and outstanding - - Common stock, $.01 par value: Authorized shares 80,000 Issued and outstanding shares 18,513 in 1998 and 16,486 in 1997 185 165 Additional paid-in capital 29,551 19,488 Retained earnings 21,282 47,032 Note receivable from stockholder (1,189) - Foreign currency translation adjustments (323) (306) ------- ------- ------- ------- TOTAL STOCKHOLDERS' EQUITY 49,506 66,379 ------- ------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $61,710 $77,178 ------- ------- ------- -------
(MORE) ODS Fourth Quarter 1998 Results Page 5 of 5 ODS NETWORKS, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (In thousands except per share amounts)
THREE MONTHS ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, 1998 1997 1998 1997 ----------------------------------------------- Net sales $12,785 $18,067 $74,610 $92,327 Cost of sales 14,973 12,852 50,230 55,795 -------- ------- -------- ------- Gross profit (2,188) 5,215 24,380 36,532 Operating expenses: Sales and marketing 5,928 7,527 29,378 30,390 Research and development 3,389 2,519 12,244 10,810 In process research and development (1) - - 3,347 - General and administrative 1,235 1,205 4,882 4,912 Amortization 540 - 968 - Restructuring Charge 3,932 - 3,932 - -------- ------- -------- ------- Operating loss (17,212) (6,036) (30,371) (9,580) Interest income, net 281 482 1,398 1,639 Other expense (986) - (1,122) - -------- ------- -------- ------- Loss before income taxes (17,917) (5,554) (30,095) (7,941) Income tax benefit (2) (875) (2,097) (4,345) (3,004) ------- ------- ------- ------- Net loss $(17,042) $(3,457) $(25,750) $(4,937) -------- ------- -------- ------- -------- ------- -------- ------- Basic earnings (loss) per share $ (0.92) $ (0.21) $ (1.50) $ (0.30) -------- ------- -------- ------- -------- ------- -------- ------- Diluted earnings (loss) per share $ (0.92) $ (0.21) $ (1.50) $ (0.30) -------- ------- -------- ------- -------- ------- -------- ------- Weighted average common shares outstanding 18,508 16,486 17,190 16,437 -------- ------- -------- ------- -------- ------- -------- ------- Weighted average shares outstanding assuming Dilution 18,508 16,486 17,190 16,437 -------- ------- -------- ------- -------- ------- -------- -------
(1) In May of 1998, the company acquired Essential Communication Corporation (Essential) and recorded a $5.3 million charge for acquired in-process research and development. Although the company reported its second quarter results in accordance with established accounting practice and the valuation provided by an independent appraisal, the company has evaluated an adjustment of the amount originally allocated to acquired in-process research and development to reflect the new methodology set forth in the September 15, 1998 letter from the SEC Staff to the American Institute of Certified Public Accountants. As a result of that evaluation, the company restated its results of operations for the second quarter of 1998 to reduce the charge for acquired in-process research and development to $2.3 million, reduce the loss reported in the second quarter from $6.2 million to $3.2 million, and increase the intangibles recorded in the purchase price allocation by $3.0 million based on the new methodology set forth by the SEC Staff. (2) The company's income tax benefit for the year ended December 31, 1998 primarily reflects the amount that ODS will recover as a refund of income taxes paid by the company in prior years. The company did not record an income tax benefit as of December 31, 1998 related to the net operating losses which can be carried forward to offset taxable income in future years. -----END PRIVACY-ENHANCED MESSAGE-----