SafeNet Reports Q2

BALTIMORE -- SafeNet (NASDAQ: SFNT), setting the standard for information security, today announced results for the second quarter ended June 30, 2006 and provided updated information regarding its investigation into accounting practices surrounding previous grants of stock options to directors, officers and employees, and related non-reliance on previously issued financial statements, and other corporate developments.

Comments contained in this release pertaining to results from operations should be read in conjunction with the section below entitled "Update on Stock Option Granting Issues".

Revenues for the three-month period ended June 30, 2006, increased 10 percent to $69.5 million, compared to $63.1 million for the same period in 2005.

Non-GAAP net income for the quarter ended June 30, 2006 was $5.2 million, or $0.22 per diluted share, compared to $8.0 million, or $0.31 per diluted share, for the same period of 2005. Non-GAAP net income excludes acquisition-related charges, lease restructuring, the expensing of stock options in accordance with FAS 123R, amortization of acquired intangibles, and integration costs. Included in the non-GAAP results were $1.2 million of costs relating to legal and other professional fees associated with stock option accounting issues. The assumed effective income tax rate is 35 percent. Reconciliations of Non-GAAP to GAAP financial measures used in this press release are contained in the Consolidated Statements of Operations, Non-GAAP table.

Net loss under generally accepted accounting principles (GAAP) for the quarter ended June 30, 2006 was $0.8 million or $0.04 per share, which compares to a GAAP net loss of $4.9 million, or $0.20 per diluted share, for the same period of 2005. For the first time, financial results for 2006 include stock-based compensation expenses as required by FAS 123R. For the quarter ended June 30, 2006, this expense was $3.4 million.

SafeNet Inc. (Nasdaq: SFNT)