Stonesoft Oyj :STONESOFT CORPORATION INTERIM REPORT FOR JANUARY-SEPTEMBER 2013

Stonesoft Corporation Stock Exchange Release 25 October 2013 at 9:15 a.m. STONESOFT CORPORATION INTERIM REPORT FOR JANUARY-SEPTEMBER 2013 INTEGRATION WITH MCAFEE IS ONGOING Stonesoft's product sales grew by 14% and net sales grew by 13% compared to the corresponding period in the previous year. Operating result was MEUR -0.4...

Stonesoft Corporation Stock Exchange Release 25 October 2013 at 9:15 a.m.

 

STONESOFT CORPORATION INTERIM REPORT FOR JANUARY-SEPTEMBER 2013

 

INTEGRATION WITH MCAFEE IS ONGOING

 

Stonesoft's product sales grew by 14% and net sales grew by 13% compared to the corresponding period in the previous year. Operating result was MEUR -0.4. The holding of Stonesoft's largest shareholder, McAfee Suomi Funding LLC ("McAfee"), in Stonesoft exceeded 90 % in June, and as a result of exceeding nine-tenths (9/10) of the shares and voting rights in Stonesoft, McAfee initiated redemption proceedings for the remaining Stonesoft shares held by minority shareholders pursuant to the Finnish Companies Act with the intention of delisting Stonesoft shares by the end of 2013. On 9 October 2013, Stonesoft submitted a delisting application to the NASDAQ OMX Helsinki Ltd.           

 

The comparable figures from the corresponding period in the previous year are in brackets.

 

July-September 2013

- Net sales MEUR 10.5 (9.3), growth 13%

- Product sales MEUR 6.4 (5.6), growth 14%

- Operating result MEUR -0.4 (0.1)

- Operating result as percentage of net sales -4 (1)%

- Earnings per share EUR -0.01 (0.00)

- Operative cash flow MEUR -1.2 (-1.8)

- Liquid cash funds at the end of the fiscal period MEUR 4.5 (7.2).

 

January-September 2013

- Net sales MEUR 28.4 (26.7), growth 7%

- Product sales MEUR 16.5 (16.0), growth 3%

- Operating result MEUR -10.4 (-1.0)

- Operating result as percentage of net sales -37 (-4)%

- Earnings per share EUR -0.17 (-0.02)

- Operative cash flow MEUR -2.7 (-0.5)

 

CEO ILKKA HIIDENHEIMO

The combination of Stonesoft and McAfee provides our customers the benefits of McAfee's global presence and sales organization of over 2,200 employees, best-in-class threat research and technology synergies. Combined, we believe we can offer our customers a world class product portfolio with world-class support. With Stonesoft's innovative technology that can be deployed as an appliance, as software or virtually, customers will be positioned to meet the high-performance needs of demanding, secure, distributed networks today and in the future. Recent incidents have shown that the need for high quality security is growing and we believe this will continue to have a strong impact on the sales of security solutions.

 

NET SALES AND RESULT

 

July-September 2013 (hereinafter 'reporting period')

 

The Group's net sales during the reporting period were MEUR 10.5 (9.3). Increase compared to the corresponding period in the previous year was MEUR 1.2, or 13%. The operating result (EBIT) was MEUR -0.4 (0.1) and the result after taxes was MEUR -0.5 (-0.0).

 

Product sales were MEUR 6.4 (5.6), increased by 14% compared to the corresponding quarter in the previous year.

 

The geographical distribution of net sales was as follows: Europe 61 (76)%, Emerging Markets (North Africa, Middle East and Latin America) 18 (11)%, North America 19 (10)% and APAC (Asia-Pacific) 2 (3)%.

 

January-September 2013 (hereinafter 'fiscal period')

 

The Group's net sales during the fiscal period were MEUR 28.4 (26.7). Increase compared to the corresponding period in the previous year was MEUR 1.8, or 7%. The operating result (EBIT) was MEUR -10.4 (-1.0) and the result after taxes was MEUR -10.6 (-1.0).

 

The expenses during the fiscal period included approximately MEUR 5.1 direct costs related to the McAfee acquisition process. Indirect costs effects are estimated to have been approximately MEUR 1.3. The process has had a negative impact on sales.

 

Product sales were MEUR 16.5 (16.0), increase by 3% compared to the corresponding period in the previous year.

 

The geographical distribution of net sales was as follows: Europe 68 (73)%, Emerging Markets (North Africa, Middle East and Latin America) 15 (13)%, North America 15 (11)% and APAC (Asia-Pacific) 2 (3)%.

 

 

FINANCE AND INVESTMENTS

 

At the end of the fiscal period, Stonesoft's total assets were MEUR 22.4 (21.0). The equity ratio was -70 (36)% and gearing (the ratio of net debt to shareholders' equity) was -0,10 (-2.39).

 

The comparable cash flow during the fiscal period was MEUR -2.7 (-0.5). The Group has interest-bearing debt from McAfee Suomi Funding LLC MEUR 5.0 (0.0). The consolidated liquid assets at the end of the fiscal period totalled MEUR 4.5 (7.2).

 

Investments in tangible and intangible assets totalled MEUR 0.4 (0.8).

 

 

DEVELOPMENT OF BUSINESS OPERATIONS

 

Main business events during the fiscal period

 

In August, Stonesoft held an extraordinary general meeting, whereby the number of the members of the Board of Directors was confirmed to be three (3). The following members were elected to the Board: Mr. Daniel F. Vaughn, Mr. Louis Riley and Mr. John Kearns.

 

In September, Mr. Anders Gottnersson was appointed as Stonesoft's Chief Financial Officer and member of the Management Team as of 2 September 2013.

 

Main business events after the fiscal period

 

In October, Stonesoft submitted an application to terminate the trading in the Stonesoft shares and to delist all the Stonesoft shares from the official list of NASDAQ OMX Helsinki Ltd. as soon as possible upon McAfee gaining title to all the shares in Stonesoft.

 

RESEARCH AND DEVELOPMENT

 

Investments in R&D during the fiscal period totalled MEUR 7.2 (5.5). This represented 20 (23)% of operating expenses.

 

R&D employed 123 (97) persons at the end of the fiscal period.

 

SHARE CAPITAL AND STOCK OPTION PROGRAMS

 

Stonesoft has one class of shares and all shares have equal rights. At the end of the fiscal period, the share capital recorded in the Trade Register was 1 150 574.64 Euros. The number of shares was 64 090 482. Stonesoft or its daughter companies do not own its shares. There were no changes in the share capital.

 

Stock Option Programs

 

The company had two valid stock option programs, Stock Option Program 2008 and Stock Option Program 2012. Additional information about both option programs is provided by the company's stock exchange releases and web pages.

 

During the fiscal period 288 750 company shares were registered based on the stock option programs.

 

Related to the tender offer process, McAfee has purchased all granted option rights.

 

DEVELOPMENT OF SHARE PRICES AND TURNOVER

 

At the start of the fiscal period on 1 January 2013, the price of Stonesoft share was EUR 1.39 (0.86). At the end of the fiscal period on 30 September 2013 the price was EUR 4.47 (1.56). The highest price was EUR 4.50 (1.78) and the lowest EUR 1.41 (0.87). During the fiscal period the total turnover of Stonesoft shares amounted to MEUR 365.9 (23.8) and 86.6 (17.6) million shares, which is 135.1 (27.7)% of the total amount of the shares. Based on the share price at the end of the fiscal period on 30 September 2013 Stonesoft's market value was MEUR 286.5 (99.3).

 

The company gave 11 notices of change of ownership during the fiscal period.

 

 

MCAFEE'S VOLUNTARY PUBLIC TENDER OFFER AND RELATED REDEMPTION PROCEEDINGS

 

The final result of the voluntary public tender offer by McAfee Inc.'s subsidiary McAfee Suomi Funding LLC was published on 25 June 2013, and according to it the shares tendered represented approximately 95.26 per cent of the shares and votes in Stonesoft. McAfee further extended the offer period by a subsequent tender offer period. As a result of the tender offer and the subsequent tender offer period the shares validly tendered represented approximately 97.93 per cent of all the shares and votes in Stonesoft.  In addition by using the tendered option rights for the subscription of Stonesoft shares McAfee has the possibility of increasing its holding to approximately 98.00 per cent of all the shares and voting rights in Stonesoft.

 

The trades of the voluntary public tender offer were executed on 27 June, 2013, and the ownership to the shares was transferred to McAfee on 2 July, 2013 upon the settlement of the trades. The trades of the subsequent tender offer period were settled on 22 July 2013.  

 

McAfee's intention is to acquire all the shares in Stonesoft. Therefore it has commenced the compulsory redemption proceedings for the remaining shares in Stonesoft pursuant to chapter 18 of the Finnish Companies Act. On 4 July 2013 McAfee filed an application to the redemption board of the Finland Chamber of Commerce to initiate the arbitral proceedings in the redemption matter and to request the nomination of the arbitrator to the proceedings. 11 September 2013 the redemption board nominated professor (emeritus) Risto Nuolimaa as the sole arbitrator in the arbitral proceedings.

 

In addition, pursuant to the redemption board's application the district court of Helsinki appointed 9 August 2013 Mr. Joakim Rehn, APA as a trustee to supervise the interests of the minority shareholders of Stonesoft in the redemption proceedings.  

 

The arbitrator shall decide upon the existence of the redemption right as well as the redemption price for the shares that are subject to the arbitral proceedings.  

 

In conjunction with the progress of the arbitral proceedings, it is the intention of McAfee to have Stonesoft delisted from the Nasdaq OMX Helsinki stock exchange as soon as practically possible. Therefore, Stonesoft's Board of Directors submitted on 9 October 2013 an application to Nasdaq OMX Helsinki Ltd. to terminate the trading in the Stonesoft shares and to delist all the Stonesoft shares from the official list of Nasdaq OMX Helsinki Ltd as soon as McAfee has gained title to all the shares of Stonesoft.

 

ACQUISITIONS AND CHANGES IN GROUP STRUCTURE

 

Due to the public tender offer made by McAfee, Stonesoft Corporation has become a group company of McAfee Group.

 

PERSONNEL

 

At the end of the fiscal period, the Group's personnel totalled 289 (240).

 

SHORT-TERM RISKS AND BUSINESS UNCERTAINTIES

 

During the fiscal year 2013, Stonesoft's main risks and business uncertainties relate to the realization timetable of the sales projects and possible production disruption of our subcontractors and suppliers. Insecurities related to public economies may have a negative effect on the public sector projects. Stonesoft has no risks related to the order book, because it normally can process incoming orders within a couple of work days.

 

Risks and uncertainties as well as the principles of Stonesoft's risk management are discussed more extensively at the company website and in the Annual Report 2012.

 

FUTURE OUTLOOK

 

Through the public tender offer made by McAfee Suomi Funding LLC, McAfee's ownership in Stonesoft Corporation's shares has risen over 95 %. Due to the significant changes caused by this, the company does not give any future outlook at this stage.

SUMMARY OF FINANCIAL STATEMENTS AND NOTES JANUARY 1 - SEPTEMBER 30, 2013

 

 

 

 

 

 

 

 

 

 

 

 

 

Basis of preparation

 

The Interim Report has been prepared in accordance with the IAS 34 Interim Reports standard, and therefore it is not reflective of Stonesoft's results as reported as a part of McAfee Inc.'s parent company Intel Corporation's consolidated financial statements that are prepared in accordance with U.S. GAAP.

 

The company has adopted certain new or revised IFRS standards and IFRIC interpretations at the beginning of the financial period as described in the Financial Statements for 2012. However, the adoption of these new and amended standards has not yet had an effect on the reported figures in practice. In other respects, the same accounting policies have been followed as in the Financial Statements for 2012. Key indicator calculations remain unchanged.

 

The figures presented in this release are unaudited.

 

FORWARD-LOOKING STATEMENTS

 

This report contains statements concerning, among other things, Stonesoft's financial condition and the results of operations that are forward-looking in nature. Such statements are not historical facts, but rather represent Stonesoft's future expectations. The company believes that the expectations reflected in these forward-looking statements are based on reasonable assumptions. However, these forward-looking statements involve inherent risks and uncertainties, which could cause actual results or outcomes to differ materially from those anticipated in the statements. These risks and uncertainties may include, among other things, (1) changes in our market position or in the Firewall/VPN and Intrusion detection and protection market in general; (2) the effects of competition; (3) the success, financial condition, and performance of our collaboration partners, suppliers and customers;(4) our ability to source quality components without interruption and at acceptable prices;(5) our ability to recruit, retain and develop appropriately skilled employees;(6) exchange rate fluctuations, including, in particular, fluctuations between the Euro, which is our reporting currency, and the US dollar;(7) other factors related to sale of products, economic situation, business, competition or legislation affecting the business of Stonesoft or the industry in general and (8) our ability to control the variety of factors affecting our ability to reach our targets and give accurate forecasts.

 

PRESS CONFERENCE CANCELLED

 

Stonesoft will not hold a separate press conference about the interim report.

 

For additional information, please contact:

Ilkka Hiidenheimo, CEO, Stonesoft Corporation

Tel. +358 9 476 711

E-mail: [email protected]

 

Anders Gottnersson, CFO, Stonesoft Corporation

Tel. +358 9 476 711

E-mail: [email protected]

 

Stonesoft Corporation

Ilkka Hiidenheimo

CEO

 

This stock exchange release and the presentation material related to this report are also available at the Stonesoft web site www.stonesoft.com.

 

Distribution:

NASDAQ OMX Helsinki Ltd

www.stonesoft.com

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