-----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, VF/vRRi12K/qKyLCKzjLjquX8f6uFrGqJHtyHIFtIaPoxJvTYP/0SCVhUEVjvuXC uil+/bXmuARQNPMReYya9A== 0001157523-03-004857.txt : 20030918 0001157523-03-004857.hdr.sgml : 20030918 20030918160504 ACCESSION NUMBER: 0001157523-03-004857 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20030918 ITEM INFORMATION: FILED AS OF DATE: 20030918 FILER: COMPANY DATA: COMPANY CONFORMED NAME: RED HAT INC CENTRAL INDEX KEY: 0001087423 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER PROGRAMMING, DATA PROCESSING, ETC. [7370] IRS NUMBER: 061364380 STATE OF INCORPORATION: DE FISCAL YEAR END: 0228 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-26281 FILM NUMBER: 03901330 BUSINESS ADDRESS: STREET 1: 1801 VARSITY DRIVE CITY: RALEIGH STATE: NC ZIP: 27606 BUSINESS PHONE: 9197543700 MAIL ADDRESS: STREET 1: 1801 VARSITY DR CITY: RALEIGH STATE: NC ZIP: 27606 8-K 1 a4476174.txt RED HAT 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 : September 18, 2003 Red Hat, Inc. Delaware 0-26281 06-1364380 - -------------------------------------------------------------------------------- (State or other juris- (Commission (IRS Employer diction of incorporation File Number) Identification No.) 1801 Varsity Drive Raleigh, NC 27606 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: 919-754-3700 (Former name or former address, if changed since last report) Item 12. Results of Operations and Financial Condition. On September 18, 2003, Red Hat, Inc. announced its financial results for the quarter ended August 31, 2003. The full text of the press release issued in connection with the announcement is attached as Exhibit 99.1 to this Current Report on Form 8-K. Disclosure of Results of Operations and Financial Condition." The information shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934 (the "Exchange Act") or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Exchange Act, except as expressly set forth by specific reference in such a filing. SIGNATURE 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. Date: September 18, 2003 Red Hat, Inc. By: Kevin B. Thompson -------------------------------------------- Chief Financial Officer (Principal Financial Officer) EXHIBIT INDEX Exhibit No. Description - ----------- ----------- 99.1 Press release dated September 18, 2003 EX-99 3 a4476174ex99.txt EXHIBIT 99.1 PRESS RELEASE Exhibit 99.1 Red Hat Delivers Strong Operating Performance in Second Quarter RALEIGH, N.C.--(BUSINESS WIRE)--Sept. 18, 2003-- Strong Growth in Red Hat Enterprise Linux Sales Drives First Quarterly Operating Profit and $10.4 Million in Operating Cash Flow Red Hat, Inc. (NASDAQ: RHAT), the world's premier open source and Linux provider, today reported financial results for its second quarter of fiscal year 2004. These results are provided in full GAAP format. In the second quarter of fiscal 2004, Red Hat reported revenue of $28.8 million, a sequential increase of 6% compared to $27.2 million in the first quarter of fiscal 2004, and a year-over-year increase of 36%. The company also reported net income of $3.3 million, or $0.02 per share. This compares to a net income of $1.5 million, or $0.01 per share, in the prior quarter, and a net loss of $1.9 million, or $0.01 per share, in the same quarter a year ago. The company generated $10.4 million, or $0.06 per share, in positive cash flow from operations during the second quarter, which represents a 89% sequential increase from the first quarter and its fifth consecutive quarter of positive cash flow from operations. The company ended the second quarter with a cash and investments balance of $307 million, a sequential increase of $7 million and a year-over-year increase of $18 million. The company reported a net operating profit of $240,000, compared to a net operating loss of $1.1 million in the prior quarter and a net operating loss of $4.7 million in the second quarter of the prior year. Highlights for the second quarter include: -- Second quarter sales of annual subscriptions for the Red Hat Enterprise Linux family of technologies increased sequentially by 2,300, or 10%, to approximately 26,000 subscriptions. -- Subscription revenues from Enterprise Technologies grew 21% sequentially and 123% year-over-year. The strong sales growth reflects accelerating market interest by enterprise customers in flexible, high-value open source solutions delivered and supported by Red Hat. -- Gross margins increased to record levels, with blended gross margins at 72%, and gross margins of Enterprise subscription technologies and services at 74%. "Our strong quarterly operating results reflect the strong demand for standards-based Red Hat Enterprise Linux Solutions in the enterprise," said Kevin Thomspon, Executive Vice President and Chief Financial Officer at Red Hat. "The consistent improvement in our gross margins over the last three quarters to 72% for the second quarter shows the significant scalability of our subscription business model." About Red Hat, Inc. Red Hat is the world's premier open source and Linux provider. Red Hat is headquartered in Raleigh, N.C. and has offices worldwide. For investor inquiries, contact Gabriel Szulik at Red Hat, (919) 754-3700, x44439. More information about Red Hat is available at www.redhat.com. FORWARD-LOOKING STATEMENTS Forward-looking statements in this press release are made pursuant to the safe harbor provisions of Section 21E of the Securities Exchange Act of 1934. Investors are cautioned that statements in this press release that are not strictly historical statements, including, without limitation, management's plans and objectives for future operations and management's assessment of market factors, constitute forward-looking statements which involve risks and uncertainties. These risks and uncertainties include, without limitation, reliance upon strategic relationships, management of growth, the possibility of undetected software errors, the risks of economic downturns generally, and in Red Hat's industry specifically, the risks associated with competition and competitive pricing pressures, the viability of the Internet, and other risks detailed in Red Hat's filings with the Securities and Exchange Commission, copies of which may be accessed through the SEC's Web site at http://www.sec.gov. RED HAT, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands - except per share amounts) Three Months Ended -------------------------------------- Aug. 31, May 31, Aug. 31, 2003 2003 2002 -------------------------------------- (Unaudited) Subscription and services revenue: Subscription: Enterprise technologies $14,918 $12,289 $6,694 Retail 3,121 4,462 2,941 Embedded 490 646 761 ---------------- -------- -------- Total subscription revenue 18,529 17,397 10,396 ---------------- -------- -------- Services: Enterprise technologies 9,147 9,039 9,993 Embedded development services 1,173 746 845 ---------------- -------- -------- Total services revenue 10,320 9,785 10,838 ---------------- -------- -------- Total subscription and services revenue 28,849 27,182 21,234 ---------------- -------- -------- Cost of subscription and services revenue: Subscription: Enterprise technologies and retail 2,220 2,974 1,930 Embedded 90 129 129 ---------------- -------- -------- Total cost of subscription revenue 2,310 3,103 2,059 ---------------- -------- -------- Services: Enterprise technologies 4,976 4,865 4,629 Embedded development services 695 784 931 ---------------- -------- -------- Total cost of services revenue 5,671 5,649 5,560 ---------------- -------- -------- Total cost of subscription and services revenue 7,981 8,752 7,619 ---------------- -------- -------- Gross profit enterprise technologies and retail 19,990 17,951 13,069 Gross profit embedded 878 479 546 ---------------- -------- -------- Total gross profit 20,868 18,430 13,615 Operating expense: Sales and marketing 9,570 8,752 8,581 Research and development 6,104 5,779 4,817 General and administrative 4,356 4,059 3,680 Mergers and acquisitions and other - - 104(a) Stock-based compensation and amortization of intangibles 598(b) 902(b) 1,131(b) ---------------- -------- -------- Total operating expense 20,628 19,492 18,313 ---------------- -------- -------- Gain (loss) from operations before extraordinary item 240 (1,062) (4,698) Other income (expense), net 3,097 2,581 2,747 ---------------- -------- -------- Net income (loss) before extraordinary item 3,337 1,519 (1,951) ---------------- -------- -------- Extraordinary item-loss on disposal of discontinued operations - - - ---------------- -------- -------- Net income (loss) $3,337 $1,519 ($1,951) ================ ======== ======== Basic income (loss) per common share Net income (loss) before extraordinary item $0.02 $0.01 ($0.01) Extraordinary item-loss on disposal of discontinued operations - - - ---------------- -------- -------- Net income (loss) $0.02 $0.01 ($0.01) ================ ======== ======== Diluted income (loss) per common share Net income (loss) before extraordinary item $0.02 $0.01 ($0.01) Extraordinary item-loss on disposal of discontinued operations - - - ---------------- -------- -------- Net income (loss) $0.02 $0.01 ($0.01) ================ ======== ======== Weighted average shares outstanding: Basic 172,127 171,146 169,977 Diluted 182,377 180,671 169,977 RED HAT, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands - except per share amounts) Six Months Ended --------------------------- Aug. 31, Aug. 31, 2003 2002 --------------------------- (Unaudited) Subscription and services revenue: Subscription: Enterprise technologies $27,207 $12,723 Retail 7,583 6,527 Embedded 1,136 1,802 ------------- -------- Total subscription revenue 35,926 21,052 ------------- -------- Services: Enterprise technologies 18,186 17,810 Embedded development services 1,919 1,894 ------------- -------- Total services revenue 20,105 19,704 ------------- -------- Total subscription and services revenue 56,031 40,756 ------------- -------- Cost of subscription and services revenue: Subscription: Enterprise technologies and retail 5,194 3,798 Embedded 219 250 ------------- -------- Total cost of subscription revenue 5,413 4,048 ------------- -------- Services: Enterprise technologies 9,841 8,748 Embedded development services 1,479 2,092 ------------- -------- Total cost of services revenue 11,320 10,840 ------------- -------- Total cost of subscription and services revenue 16,733 14,888 ------------- -------- Gross profit enterprise technologies and retail 37,941 24,514 Gross profit embedded 1,357 1,354 ------------- -------- Total gross profit 39,298 25,868 Operating expense: Sales and marketing 18,322 16,387 Research and development 11,883 9,604 General and administrative 8,415 7,055 Mergers and acquisitions and other - 2,268(a) Stock-based compensation and amortization of intangibles 1,500(b) 2465(b) ------------- -------- Total operating expense 40,120 37,779 ------------- -------- Gain (loss) from operations before extraordinary item (822) (11,911) Other income (expense), net 5,678 5,633 ------------- -------- Net income (loss) before extraordinary item 4,856 (6,278) ------------- -------- Extraordinary item-loss on disposal of discontinued operations - (261) ------------- -------- Net income (loss) $4,856 ($6,539) ============= ======== Basic income (loss) per common share Net income (loss) before extraordinary item $0.03 ($0.04) Extraordinary item-loss on disposal of discontinued operations - (0.00) ------------- -------- Net income (loss) $0.03 ($0.04) ============= ======== Diluted income (loss) per common share Net income (loss) before extraordinary item $0.03 ($0.04) Extraordinary item-loss on disposal of discontinued operations - (0.00) ------------- -------- Net income (loss) $0.03 ($0.04) ============= ======== Weighted average shares outstanding: Basic 171,636 169,902 Diluted 181,185 169,902 (a) This amount represents costs related to integration of acquisitions, primarily severance and duplicate facilities, that are not part of recurring operations and a restructuring charge representing severance costs associated with the completion of the restructuring of our embedded business which began in Q4 of fiscal 2002. (b) This amount represents amortization of deferred compensation which was primarily related to acquisitions made in prior periods and amortization of intangible assets related to acquisitions made by the Company. RED HAT, INC. CONSOLIDATED BALANCE SHEETS (In thousands) ASSETS Aug. 31, Feb. 28, 2003 2003 --------- --------- Assets: Cash and investments in debt securities $306,733 $292,340 Accounts receivable, net 21,479 17,429 Costs and estimated earnings in excess of billings 7,164 6,978 Inventory 864 799 Prepaid expenses and other assets 9,967 8,993 Property and equipment, net 24,848 22,972 Goodwill and intangibles, net 40,927 40,828 --------- --------- Total assets $411,982 $390,339 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY Liabilities: Accounts payable $5,694 $5,502 Accrued expenses 7,627 7,614 Deferred revenue 30,381 17,779 Deferred lease credits 5,438 5,382 Other liabilities 17,041 17,641 --------- --------- Total liabilities 66,181 53,918 Commitments and contingencies - - Stockholders' equity: Noncontrolling interest in subsidiary 244 115 Preferred stock - - Common stock 17 17 Additional paid-in capital 636,004 630,798 Deferred compensation (946) (2,403) Accumulated deficit (285,548) (290,404) Treasury stock, at cost (7,436) (7,436) Accumulated other comprehensive income 3,466 5,734 --------- --------- Total stockholders' equity 345,801 336,421 --------- --------- Total liabilities and stockholders' equity $411,982 $390,339 ========= ========= Note: Balance sheet as presented above is not classified with regard to GAAP maturities of cash and investments in debt Securities. RED HAT, INC. CASH FLOW SUMMARY (In thousands) Three Three Months Months Ended Ended Aug. 31, Aug. 31, 2003 2002 ------------------- Net income (loss) $3,337 $(1,951) Non-cash expenses 2,470 3,185 Net change in working capital items 4,584 (653) --------- --------- Net cash provided by operating activities 10,391 581 Cash flows from investing activities: Purchases of property and equipment (2,351) (1,752) Net change in market value of debt securities (4,055) 2,823 --------- --------- Net cash provided by (used in) investing activities (6,406) 1,071 Net cash provided by (used in) financing activities 2,959 (17) Effect of foreign currency exchange rates on cash and cash equivalents (217) 353 --------- --------- Net increase in cash and investments 6,727 1,988 Cash and investments at beginning of period 300,006 286,557 --------- --------- Cash and investments at end of period $306,733 $288,545 ========= ========= CONTACT: Red Hat, Inc. Leigh Day or Gabriel Szulik, 919-754-3700 lday@redhat.com, gszulik@redhat.com -----END PRIVACY-ENHANCED MESSAGE-----