Financials

2004 Fourth-Quarter Financial Statements

ENTRUST, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

IN ACCORDANCE WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES

(in thousands, except per share data)
Three Months Ended
December 31		 Year Ended
December 31

2004
2003
2004
2003
(unaudited) (unaudited)
Revenues:
Product $10,911 $8,479 $29,295 $30,974
Services and maintenance 16,180
 15,233
 61,662
 56,920
Total revenues 27,091
 23,712
 90,957
 87,894
Cost of revenues:
Product 1,184 1,210 4,149 5,341
Services and maintenance 7,632 7,771 29,105 29,825
Amortization of purchased product rights 197
 -
 384
 568
Total cost of revenues 9,013
 8,981
 33,638
 35,734
Total Gross profit 18,078
 14,731
 57,319
 52,160
Operating expenses:
Sales and marketing 7,730 7,246 26,322 34,985
Research and development 4,406 4,384 17,266 22,566
General and administrative 2,776 3,070 12,569 13,143
Impairment of purchased product rights - - - 1,134
Restructuring charges and adjustments -
 -
 -
 13,623
Total operating expenses 14,912
 14,700
 56,157
 85,451
Income (loss) from operations 3,166
 31
 1,162
 (33,291)
Other income (expense):
Interest income 377 271 1,281 1,680
Foreign exchange gain (loss) (11) (59) 429 (431)
Loss from equity investment (438) (153) (1,111) (603)
Write-down of long-term strategic investments -
 -
 -
 (2,780)
Total other income (expense) (72)
 59
 599
 (2,134)
Income (loss) before income taxes and minority interest 3,094 90 1,761 (35,425)
Minority interest in subsidiary 6
 -
 4
 -
Income (loss) before income taxes 3,100 90 1,765 (35,425)
Provision for income taxes 481
 30
 687
 441
Net income (loss) $2,619
 $60
 $1,078
 $(35,866)
Weighted average common shares used
Basic 62,492 63,551 62,976 63,588
Diluted 62,963 63,551 64,127 63,588
Net income (loss) per share
Basic $0.04 $0.00 $0.02 ($0.56)
Diluted $0.04 $0.00 $0.02 ($0.56)

ENTRUST, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)
December 31
2004
 2003
(unaudited)

ASSETS
Cash and marketable investments $99,319 $104,668
Accounts receivable, net of allowance for doubtful accounts 16,203 18,771
Other current assets 3,832 3,980
Property and equipment, net 5,168 7,678
Purchased product rights and purchased non-contractual customer relationships, net 2,887 -
Goodwill, net 12,713 11,186
Long-term equity investment 4,028 660
Other long-term assets, net 1,733
 1,809
Total assets $145,883
 $148,752

LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable and accruals $15,394 $15,811
Accrued restructuring charges 30,090 35,426
Deferred revenue 22,975 16,615
Long-term liabilities 1,426
 228
Total liabilities 69,885 68,080
Shareholders' equity 75,998
 80,672
Total liabilities and shareholders' equity $145,883
 $148,752
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