RNBO Rainbow Technologies (MM)

Rainbow Technologies Reports Strong Q4 and FY 2003 Earnings Earnings and Revenues Increase on Continued Strong Demand for Secure Communications Products, eSecurity Products; SafeNet Merger Outlook Points To Positive Growth IRVINE, Calif., Feb. 11 /PRNewswire-FirstCall/ -- Rainbow Technologies, Inc., a leading provider of digital content and transaction security for the Internet, SSL VPNs, software applications and high assurance security solutions, today announced revenues for Q4 2003 of $39.2 million, up 17 percent year-over-year. The company reported GAAP net income of $2.8 million, or $0.10 per share in Q4-2003, compared with a profit from continuing operations of $0.08 per share in Q4-2002. Total GAAP net income for Q4-2002 was $4.8 million, or $0.18 per share. In addition, the company incurred approximately $2.3 million in expenses related to the anticipated merger with SafeNet, Inc. These expenses were partially offset by a $1.1 million change in estimates that resulted in a reduction for certain reserves. For FY2003, Rainbow Technologies reported GAAP revenues of $141.8 million in FY2003 compared with $126.0 million in FY2002. Rainbow's FY2003 GAAP earnings were $7.5 million, or $0.28 per diluted share, compared with a FY2002 net loss of $37.7 million, or $1.43 per diluted share. GAAP revenues for the company's Secure Communications business segment for Q4 were $22.9 million, up 12 percent year-over-year. The growth is primarily attributed to strong demand for high performance secure communications chips. Q4-2003 GAAP revenues for the eSecurity business segment were $16.75 million, up 25 percent year-over-year. The increase in revenue in the eSecurity segment is primarily due to revenues of acquired Luna products from Chrysalis. The acquisition of Chrysalis-ITS was completed last quarter. "I am pleased that we have met our quarterly and annual revenue goals," said Walt Straub, president and CEO, Rainbow Technologies. "I am optimistic about the growth opportunities for Rainbow in 2004. In October 2003, we announced a plan to merge with SafeNet. The merger is subject to shareholder approval and other conditions. I strongly believe the combined company will become the premier network security and OEM security provider." Excluding the impact of the $2.3 million in merger-related expenses, the non-GAAP earnings per share for Q4-2003 were approximately $0.16 per share. Excluding the impact of the merger-related expenses and $3.6 million in litigation settlement expenses incurred during Q2-2003, the non-GAAP earnings per share for FY2003 were approximately $0.45 per share. Q4-2003 FY-2003 Non-GAAP net/share $0.16 $0.45 Merger Exp ($0.06) ($0.06) Litigation $0.00 ($0.09) GAAP net/share $0.10 $0.28 Conference Call Rainbow Technologies will host its Q4 and FY2003 earnings conference call this afternoon at 2:00 p.m. PST (5:00 p.m. EST). Individuals may listen to the meeting by conference call dial-in (888) 261-2573. In addition, the meeting can be accessed via audio replay dial-in (800) 642-1687 or (706) 679-8222, reference conference ID 5419186. The audio replay will be available for one week. In addition, the conference call will be Webcast. The Webcast can be accessed via the company's website at http://www.rainbow.com/ and going to the Investor Relations link. About Rainbow Technologies, Inc. Making security simple since 1979, Rainbow Technologies is a leading provider of proven information security solutions for mission-critical data and applications used in business, organization and government computing environments. Rainbow has been breaking the security paradigm by making complex security simple to implement and use for more than two decades. With headquarters in Irvine, Calif., Rainbow maintains offices and authorized distributors throughout the world. For more information, visit the Web site at http://www.rainbow.com/ . Rainbow Technologies, Rainbow Mykotronx, NetSwift iGate, Luna and iKey are trademarks of Rainbow Technologies, Inc. All other company and product names are trademarks of their respective organizations. CAUTIONARY STATEMENT REGARDING FORWARD LOOKING STATEMENTS Statements contained in this release that are not historical facts could be deemed to be forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These statements are based on management's current expectations and beliefs, are not guarantees of future performance and are subject to a number of risks, uncertainties and assumptions that could cause actual results to differ materially from those described in the forward-looking statements, including, among others: general industry trends, the risk that the SafeNet and Rainbow businesses will not be integrated successfully; costs related to the proposed merger; the risk that SafeNet and Rainbow will fail to obtain the required stockholder approvals; the risk that the transaction will not close; the risk that the businesses of the companies will suffer due to uncertainty; and other economic, business,competitive, and/or regulatory factors affecting the SafeNet and Rainbow businesses generally, including those set forth in their filings with the Securities and Exchange Commission, including each of Rainbow's and SafeNet's Annual Reports on Form 10-Kfor the fiscal year ended December 31. 2002, their most recent Quarterly Reports on Form 10-Q and their Current Reports on Form 8-K. If any of these risks or uncertainties materializes or any of these assumptions proves incorrect, SafeNet's and Rainbow's results could differ materially from SafeNet's and Rainbow's expectations in these statements. SafeNet and Rainbow assume no obligation and do not intend to update or alter these forward-looking statements, whether as a result of new information, future events, or otherwise. SafeNet and Rainbow filed with the SEC a joint proxy statement/prospectus and other relevant materials in connection with the merger of SafeNet and Rainbow. The joint proxy statement/prospectus will be mailed to the stockholders of SafeNet and Rainbow. Investors and security holders of SafeNet and Rainbow are urged to read the joint proxy statement/prospectus and the other relevant materials when they become available because they will contain important information aboutSafeNet, Rainbow and the merger. The joint proxy statement/prospectus and other relevant materials (when they become available), and any other documents filed by SafeNet or Rainbow with the SEC, may be obtained free of charge at the SEC's web site at http://www.sec.gov/ . In addition, investors and security holders may obtain free copies of the documents filed with the SEC by SafeNet by contacting Michelle Layne, SafeNet Investor Relations, 4690 Millenium Drive, Belcamp, Maryland 21017, (443) 327-1239. Investors and security holders may obtain free copies of the documents filed with the SEC by Rainbow by contacting Rainbow Investor Relations, 50 Technology Drive, Irvine, California 92718 (949) 450-7377. Investors and security holders are urged toread the joint proxy statement/prospectus and the other relevant materials when they become available before making any voting or investment decision. SafeNet and its executive officers, directors and employees may be deemed to be participants in the solicitation of proxies from the stockholders of SafeNet and Rainbow in favor of the transaction. A list of the names of SafeNet's executive officers and directors, and a description of their respective interests in SafeNet, are set forth in the proxy statement for SafeNet's 2003 Annual Meeting of Stockholders, which was filed with the SEC on April 30, 2003. Investors and security holders may obtain additional information regarding the interests of SafeNet's executive officers and directors in the transaction by reading the joint proxy statement/prospectus. Rainbow and its executive officers, directors and employees may be deemed to be participants in the solicitation of proxies from the stockholders of SafeNet and Rainbow in favor of the transaction. A list of the names of Rainbow's executive officers and directors, and a description of their respective interests in Rainbow, are set forth in the proxy statement for Rainbow's 2003 Annual Meeting of Stockholders, which was filed with the SEC onApril 28, 2003. Investors and security holders may obtain additional information regarding the interests of Rainbow's executive officers and directors in the transaction by reading the joint proxy statement/prospectus. RAINBOWTECHNOLOGIES, INC. CONSOLIDATED STATEMENTS OF INCOME (in thousands, except per share amounts) Three months ended Dec. 31, % of Dec. 31, % of % 2003 Revenues 2002 Revenues Change Revenues: eSecurity Products $16,275 42% $13,068 39% 25% Secure Communications Products 22,939 58% 20,476 61% 12% Total revenues 39,214 100% 33,544 100% 17% Operating expenses: Cost of eSecurity Products 4,458 11% 4,083 12% 9% Cost of Secure Communications Products 13,735 35% 14,238 42% -4% Selling, general and administrative 13,637 35% 9,613 29% 42% Research and development 2,823 7% 1,828 5% 54% Litigation settlement -- 0% -- 0% -- Total operating expenses 34,653 88% 29,762 89% 16% Operating income (loss) 4,561 12% 3,782 11% 21% Income (loss) on long- term investments and marketable securities (82) 0% 10 0% -920% Change in value for common stock to be issued (456) -1% - 0% - Other expense, net (260) -1% (1,009) -3% -74% Income (loss) from continuing operations before income taxes 3,763 10% 2,783 8% 35% Provision for income taxes (846) -2% (580) -2% 46% Income (loss) from continuing operations 2,917 7% 2,203 7% 32% Income (loss) from discontinued operations, net of applicable taxes (7) 0% 2,660 8%-100% Net income (loss) $2,910 7% $4,863 14% -40% Basic income (loss) per share: Continuing operations $0.11 $0.08 Discontinued operations (0.00) 0.11 Net income (loss) $0.11 $0.19 Diluted income (loss) per share: Continuing operations $0.10 $0.08 Discontinued operations (0.00) 0.10 Net income (loss) $0.10 $0.18 Shares in computing net income (loss) per share: Basic 27,084 26,239 Diluted 28,708 27,044 Twelve months ended Dec. 31, % of Dec. 31, % of % 2003 Revenues 2002 Revenues Change Revenues: eSecurity Products $54,119 38% $48,818 39% 11% Secure Communications Products87,709 62% 77,234 61% 14% Total revenues 141,828 100% 126,052 100% 13% Operating expenses: Cost of eSecurity Products 16,467 12% 33,422 27% -51% Cost of Secure Communications Products 62,918 44% 58,365 46% 8% Selling, general and administrative 38,121 27% 33,480 27% 14% Research and development 8,779 6% 8,923 7% -2% Litigation settlement 3,632 3% -- 0% -- Total operating expenses 129,917 92% 134,190 106% -3% Operating income (loss) 11,911 8% (8,138) -6% -246% Income (loss) on long- term investments and marketable securities (1,286) -1% (98) 0% 1212% Change in value for common stock to be issued (789) -1% -- 0% -- Other expense, net (10) 0% (478) 0% -98% Income (loss) from continuing operations before income taxes 9,826 7% (8,714) -7% -213% Provision for income taxes (1,998) -1% (14,313) -11% -86% Income (loss) from continuing operations 7,828 6% (23,027) -18% -134% Income (loss) from discontinued operations, net of applicable taxes (261) 0% (14,647) -12% -98% Net income (loss) $7,567 5% $(37,674) -30% -120% Basic income (loss) per share: Continuing operations $0.29 $(0.87) Discontinued operations (0.01) (0.56) Net income (loss) $0.28 $(1.43) Diluted income (loss) per share: Continuing operations $0.28 $(0.87) Discontinued operations (0.01) (0.56) Net income (loss) $0.27 $(1.43) Shares in computing net income (loss) per share: Basic 26,796 26,419 Diluted 27,786 26,419 RAINBOW TECHNOLOGIES, INC. CONSOLIDATED BALANCE SHEETS (in thousands, except share data) Dec. 31, Dec. 31, 2003 2002 ASSETS Current assets: Cash and cash equivalents $63,455 $50,922 Marketable available-for-sale and trading securities 311 301 Accounts receivable, net of allowance for doubtful accounts of $500 and $626 in 2003 and 2002, respectively 16,835 19,221 Inventories 12,031 9,308 Income tax receivable 625 5,572 Prepaid expenses and other current assets 4,224 1,765 Total current assets 97,481 87,089 Property, plant and equipment, at cost: Equipment 23,167 21,981 Buildings 9,215 7,769 Furniture 3,991 2,909 Leasehold improvements 3,668 2,889 40,041 35,548 Less accumulated depreciation and amortization 26,224 21,628 Net property, plant and equipment 13,817 13,920 Software development costs, net of accumulated amortization of $5,492 and $8,156 in 2003 and 2002, respectively 2,844 3,775 Product licenses, net of accumulated amortization of $5,670 and $5,567 in 2003 and 2002, respectively 1,674 2,944 Intangible assets, net of accumulated amortization of $627 and $34 in 2003 and 2002, respectively 9,951 101 Goodwill 10,122 2,680 Other assets 518 1,080 Total Assets $136,407 $111,589 LIABILITIES ANDSHAREHOLDERS' EQUITY Current liabilities: Accounts payable $7,979 $8,138 Accrued payroll and related expenses 7,702 6,602 Warranty reserve 1,2791,844 Deferred income 1,622 135 Income taxes payable 3,380 1,442 Accrued litigation settlement 2,421 -- Accrued expenses and other current liabilities 9,874 6,773 Total current liabilities 34,257 24,934 Long-term accrued restructuring costs 2,019 2,349 Other liabilities 3,104 1,926 Commitments and contingencies Shareholders' equity: Common stock, $.001 par value, 55,000,000 shares authorized, 27,160,574 and 26,268,936 shares issued and outstanding in 2003 and 2002, respectively 27 26 Additional paid-in capital 60,508 58,313 Accumulated other comprehensive income 5,232 348 Retained earnings 31,260 23,693 Total shareholders' equity 97,027 82,380 Total Liabilities and Shareholders' Equity $136,407 $111,589 DATASOURCE: Rainbow Technologies, Inc. CONTACT: Dan Chmielewski of Rainbow Technologies, Inc., +1-949-450-7377, Web site: http://www.rainbow.com/

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