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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, DC 20549
 Form 10-K/A
 Amendment No. 1
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2005
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 Commission File No. 000-25120
 
 RSA Security Inc.
 (Exact name of registrant as specified in its charter)
 Delaware
    
    04-2916506(State or other jurisdiction of
    
    (I.R.S. EmployerIncorporation or Organization)
    
    Identification No.)
 174 Middlesex Turnpike
Bedford, Massachusetts 01730  (Address of Principal Executive Offices)
 Registrants telephone number, including area code:
(781) 515-5000
 
 Securities Registered Pursuant to Section 12(b) of the Act: None
 Securities Registered Pursuant to Section 12(g) of the Act:
Common Stock, $.01 Par Value
Common Stock Purchase Rights  (Title of class)
 þ o
 o þ
 þ o
 o
  þ o o
 o þ
   DOCUMENTS INCORPORATED BY REFERENCE
 PART OF FORM 10-KDOCUMENT
    
    INTO WHICH INCORPORATEDPortions of the Registrants Proxy
Statement for the 2006 Annual
Meeting of Stockholders
    
    Items 10, 11, 12, 13 & 14 of Part III
  RSA Security, RSA, Keon, ClearTrust, SecurID, BSAFE, ACE/Server, Confidence Inspired, The Most
Trusted Name in e-Security, RSA Secured, FraudAction, eStamp and SecureSuite are either registered
trademarks or trademarks of RSA Security Inc. in the United States and/or other countries. All
other trademarks or trade names referred to in this Report are the property of their respective
owners.




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EXPLANATORY NOTE
 .
  We are not restating any of our previously reported financial statements in this amendment,
nor does this amendment change any of our disclosures except as noted above.




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TABLE OF CONTENTS  ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULESSIGNATURESEXHIBIT INDEXEX-31.3 Section 302 Certification of CEOEX-31.4 Section 906 Certification of CFO    Table of Contents  
 ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 We make statements in this Report that are forward looking, that is, statements that are not
historical facts but that convey projections about the future. For example, statements containing
the words believes, anticipates, plans, expects, estimates, intends, may, projects,
will, would, and similar expressions may be forward-looking statements. We caution investors
not to place undue reliance on any forward-looking statements in this Report because these
statements speak only as of the date when made. Furthermore, we are not obligated to publicly
update any forward-looking statements, whether as a result of new information, future events or
otherwise. There are a number of factors that could cause our actual results to differ materially
from those indicated by these forward-looking statements, including without limitation the factors
described above under Part I, Item 1A Risk Factors.
 Overview
   ® ® ® ® ® ® ®
  
    
    Our authentication product line contributes more than 80% of our revenue, while our less
mature Enterprise software products continue to build revenue.
    
    Our Developer solutions continue to contribute between 7% and 12% of our total revenue
despite the availability of free, open source products that compete with our RSA BSAFE
product line. Our Developer solutions revenue tends to fluctuate from quarter to quarter,
depending on the number of large transactions in any given quarter.
    
    Although the majority of our customers utilize our products to secure and to manage
network and application access for their employees and partners, our sales of authentication
credentials for use by consumers are increasing. We sell most of our consumer authentication
credentials on a subscription basis, with revenue being recognized over the course of
several years. Accordingly, our deferred revenue balance will likely increase as we build
consumer revenue.
    
    Our product line synergies and the strength of our customer base create opportunities for
us to sell additional products to existing customers and broader, multi-product solutions to
new customers.
    
    Information technology budgets remain constrained, which has had and could continue to
have a direct effect on the sale of our products.




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
    
    Some of our products, especially our single sign-on solutions and Web access management
products, have long and unpredictable sales cycles, in part because our customers may need
to invest potentially substantial resources and modify their network infrastructures to take
advantage of the products.
    
    Increased competitive activity is putting pressure on our product prices and lengthening
our sales cycles.
       2




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Application of Critical Accounting Policies and Estimates
   Revenue Recognition
 ®
   Allowance for Sales Returns
 Allowance for Doubtful Accounts
 Allowance for Warranty Obligations
 3




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Income Taxes
     Valuation of Goodwill and Other Intangible Assets
 4




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Restructurings
   Recent
Accounting Pronouncements 
  2005 Compared with 2004
 Summary of Financial Performance for the year ended December 31, 2005
 
    
    Our revenue for the year ended December 31, 2005 was $310.1 million, an increase of $2.6
million, or 0.9%, compared to revenue of $307.5 million for the year ended December 31,
2004.
    
    Our gross profit for the year ended December 31, 2005 was $244.5 million, a decrease of
$7.8 million, or 3%, compared to gross profit of $252.3 million for the year ended December
31, 2004.
    
    Our net income for the year ended December 31, 2005 was $42.4 million, an increase of
$7.4 million, or 21%, compared to net income of $35.0 million for the year ended December
31, 2004.
    
    During 2005, the United States Internal Revenue Service (IRS) issued tax refunds and
associated interest payments to us totaling $9.9 million. The tax refunds received during
2005 were associated with our IRS audit for the years 1996 through 2002.
    
    Our cash, cash equivalents, and marketable securities were $187.8 million at December 31,
2005, compared to $289.7 million at December 31, 2004. The reduction to the balance at
December 31, 2005 reflects $123.2 million in cash payments associated with the acquisition
of Cyota, Inc., net of the $5.6 million in cash and cash equivalents on Cyotas balance
sheet as of the December 30, 2005 closing date. Additionally, we repurchased 2,154,729
shares of our common stock for $29.0 million during the year ended December 31, 2005.
 5




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Results of Operations
  Years Ended December 31,2005
    
    2004
    
    2003RevenueProducts
    
    
    71.6
    %
    
    
    75.6
    %
    
    
    74.5
    %Maintenance and professional services
    
    
    28.4
    
    
    
    24.4
    
    
    
    25.5Total revenue
    
    
    100.0
    
    
    
    100.0
    
    
    
    100.0Cost of revenueProducts
    
    
    12.6
    
    
    
    10.2
    
    
    
    12.5Maintenance and professional services
    
    
    8.2
    
    
    
    7.6
    
    
    
    8.0Amortization of technology related intangible assets
    
    
    0.4
    
    
    
    0.2
    
    
    
    Total cost of revenue
    
    
    21.2
    
    
    
    18.0
    
    
    
    20.5Gross margin
    
    
    78.8
    
    
    
    82.0
    
    
    
    79.5Costs and expensesResearch and development
    
    
    20.2
    
    
    
    20.1
    
    
    
    20.6Marketing and selling
    
    
    36.2
    
    
    
    35.8
    
    
    
    36.3General and administrative
    
    
    10.4
    
    
    
    10.6
    
    
    
    13.0Restructurings
    
    
    0.7
    
    
    
    0.3
    
    
    
    Total
    
    
    67.4
    
    
    
    66.8
    
    
    
    69.9Income from operations
    
    
    11.4
    
    
    
    15.2
    
    
    
    9.6Interest (expense) income and other
    
    
    3.2
    
    
    
    (1.1
    )
    
    
    (3.1
    )Income from investing activities
    
    
    
    
    
    
    0.1
    
    
    
    0.6Income before provision for income taxes
    
    
    14.6
    
    
    
    14.2
    
    
    
    7.1Provision for income taxes
    
    
    0.9
    
    
    
    2.8
    
    
    
    1.4Net income
    
    
    13.7
    %
    
    
    11.4
    %
    
    
    5.7
    %
 Revenue
  Years Ended December 31,
    
    Percentage2005
    
    2004
    

Increase($ in millions)
    
    Revenue
    
    Percentage
    
    Revenue
    
    Percentage
    
    (Decrease)Product group:Enterprise solutions
    
    $
    282.6
    
    
    
    91.1
    %
    
    $
    279.2
    
    
    
    90.8
    %
    
    
    1.2
    %Developer solutions
    
    
    27.5
    
    
    
    8.9
    %
    
    
    28.3
    
    
    
    9.2
    %
    
    
    (2.9
    )%Total
    
    $
    310.1
    
    
    
    100.0
    %
    
    $
    307.5
    
    
    
    100.0
    %
    
    
    0.9
    %Product type:Authenticators
    
    $
    148.3
    
    
    
    47.8
    %
    
    $
    151.2
    
    
    
    49.2
    %
    
    
    (1.9
    )%Software products
    
    
    73.8
    
    
    
    23.8
    %
    
    
    81.3
    
    
    
    26.4
    %
    
    
    (9.2
    )%Maintenance and professional services
    
    
    88.0
    
    
    
    28.4
    %
    
    
    75.0
    
    
    
    24.4
    %
    
    
    17.3
    %Total
    
    $
    310.1
    
    
    
    100.0
    %
    
    $
    307.5
    
    
    
    100.0
    %
    
    
    0.9
    %Product line:Authentication products
    
    $
    257.2
    
    
    
    82.9
    %
    
    $
    257.6
    
    
    
    83.8
    %
    
    
    (0.2
    )%Encryption products
    
    
    27.4
    
    
    
    8.9
    %
    
    
    28.0
    
    
    
    9.1
    %
    
    
    (2.0
    )%Web access management products
    
    
    25.5
    
    
    
    8.2
    %
    
    
    21.9
    
    
    
    7.1
    %
    
    
    16.2
    %Total
    
    $
    310.1
    
    
    
    100.0
    %
    
    $
    307.5
    
    
    
    100.0
    %
    
    
    0.9
    %
  Years Ended December 31,
    
    Percentage2005
    
    2004
    
    Increase($ in millions)
    
    Revenue
    
    Percentage
    
    Revenue
    
    Percentage
    
    (Decrease)United States
    
    $
    170.2
    
    
    
    54.9
    %
    
    $
    172.7
    
    
    
    56.2
    %
    
    
    (1.5
    )%Europe and other
    
    
    103.6
    
    
    
    33.4
    %
    
    
    100.6
    
    
    
    32.7
    %
    
    
    3.0
    %Asia Pacific
    
    
    36.3
    
    
    
    11.7
    %
    
    
    34.2
    
    
    
    11.1
    %
    
    
    6.2
    %Total
    
    $
    310.1
    
    
    
    100.0
    %
    
    $
    307.5
    
    
    
    100.0
    %
    
    
    0.9
    %
 6




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Percentage2005
    
    2004
    
    IncreaseNumber of credentials licensed
    
    
    4,673
    
    
    
    3,887
    
    
    
    20.2
    %
      
    
    As new, lower cost remote access technologies become available and as employment rates
increase, we believe that we will benefit with increased total product revenue.
    
    We believe the increased awareness of digital identity theft will drive organizations and
consumers to adopt technologies such as strong authentication, and we believe we will
benefit from this trend.
    
    We believe that governmental regulations regarding the access to and distribution of
private information will drive demand for our products. For example, we believe our revenue
from the healthcare and financial services markets will increase as companies work to bring
their information technology systems into compliance with industry-specific privacy and
security laws and standards.
    
    We believe that as the United States government proceeds with its agenda of increasing
awareness and funding of cyber-security issues and focusing on homeland security, we may
benefit with increased revenue.
    
    However, information technology budgets continue to be constrained, and the continued
uncertainty in the economy and global affairs may affect revenue generated from the sales of
our products in future quarters.
    
    In addition, we are seeing increased competitive activity, which is putting pressure on
our product prices. We believe that increased competition is lengthening our sales cycles.
    
    Growth in our consumer authentication credentials will increase the mix of our
subscription revenue recognized ratably over the life of the contracts.
 7




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
    
    In 2005, we instituted a major new program for our resellers and distributors and
reorganized our sales force. Our future revenue will depend on the rate at which our current
resellers and distributors participate in the new program, our ability to attract new
resellers and distributors to the program and the effectiveness of our reorganized sales
force.
 Gross Profit
  Years Ended December 31,2005
    
    
    2004($ in millions)
    
    Gross Profit
    
    
    Gross Margin

    
    Gross Profit
    
    
    Gross MarginProducts
    
    $
    181.9
    
    
    
    81.9
    %
    
    $
    200.6
    
    
    
    86.3
    %Maintenance and professional services
    
    
    62.6
    
    
    
    71.1
    %
    
    
    51.7
    
    
    
    68.9
    %Total
    
    $
    244.5
    
    
    
    78.8
    %
    
    $
    252.3
    
    
    
    82.0
    %
   Research and Development
  December 31,($ in millions)
    
    2005
    
    2004
    
    % ChangeResearch and development
    
    $
    62.5
    
    
    $
    61.9
    
    
    
    1.0
    %Percentage of revenue
    
    
    20.2
    %
    
    
    20.1
    %
  Marketing and Selling
  December 31,($ in millions)
    
    2005
    
    2004
    
    % ChangeMarketing and selling
    
    $
    112.1
    
    
    $
    110.2
    
    
    
    1.7
    %Percentage of revenue
    
    
    36.2
    %
    
    
    35.9
    %
  General and Administrative
  December 31,%($ in millions)
    
    2005
    
    2004
    
    ChangeGeneral and administrative
    
    $
    32.4
    
    
    $
    32.6
    
    
    
    (0.8
    )%Percentage of revenue
    
    
    10.4
    %
    
    
    10.6
    %
 8




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Restructurings
  Facility Exit
    
    
    
    
    
    LiquidationCosts & Related
    
    
    
    
    
    of SwedenAsset
    
    Severance
    
    Development($ in millions)
    
    Impairments
    
    Costs
    
    Operations
    
    TotalBalance at January 1, 2003
    
    $
    35.9
    
    
    $
    1.4
    
    
    $
    0.6
    
    
    $
    37.9Revision of previously recorded restructuring charges  2003
    
    
    0.8
    
    
    
    (0.6
    )
    
    
    (0.2
    )
    
    
    Payments  2003
    
    
    (8.8
    )
    
    
    (0.6
    )
    
    
    (0.4
    )
    
    
    (9.8
    )Write offs  2003
    
    
    (0.2
    )
    
    
    
    
    
    
    
    
    
    
    (0.2
    )Balance at December 31, 2003
    
    
    27.7
    
    
    
    0.2
    
    
    
    
    
    
    
    27.9Revision of previously recorded restructuring charges  2004
    
    
    1.0
    
    
    
    (0.2
    )
    
    
    
    
    
    
    0.8Payments  2004
    
    
    (9.0
    )
    
    
    
    
    
    
    
    
    
    
    (9.0
    )Balance at December 31, 2004
    
    
    19.7
    
    
    
    
    
    
    
    
    
    
    
    19.7Restructuring charges  2005
    
    
    
    
    
    
    2.1
    
    
    
    
    
    
    
    2.1Payments  2005
    
    
    (5.1
    )
    
    
    (0.9
    )
    
    
    
    
    
    
    (6.0
    )Balance at December 31, 2005
    
    $
    14.6
    
    
    $
    1.2
    
    
    $
    
    
    
    $
    15.8
     Year ending December 31, 2006
    
    $   5.9 millionYear ending December 31, 2007
    
    4.3 millionYear ending December 31, 2008
    
    3.4 millionYear ending December 31, 2009
    
    2.2 millionTotal
    

$  15.8 million
 9




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Interest Income (Expense) and Other, Net
  Years Ended December 31,($ in millions)
    
    2005
    
    2004Interest expense on 7% convertible debentures
    
    $
    
    
    
    $
    (4.2
    )Non cash amortization of deferred financing costs
    
    
    
    
    
    
    (1.3
    )Non cash accretion of warrant value
    
    
    
    
    
    
    (1.1
    )Interest income and other, net
    
    
    2.2
    
    
    
    0.4Investment income
    
    
    7.2
    
    
    
    3.2Unrealized gain (loss) from foreign currency translation
    
    
    0.5
    
    
    
    (0.3
    )Total interest income (expense) and other, net
    
    $
    9.9
    
    
    $
    (3.3
    )
   Provision for Income Taxes
     10




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2004 Compared with 2003
 Revenue
  Years Ended December 31,2004
    
    2003
    
    Percentage($ in millions)
    
    Revenue
    
    Percentage
    
    Revenue
    
    Percentage
    
    IncreaseProduct group:Enterprise solutions
    
    $
    279.2
    
    
    
    90.8
    %
    
    $
    235.8
    
    
    
    90.7
    %
    
    
    18.4
    %Developer solutions
    
    
    28.3
    
    
    
    9.2
    %
    
    
    24.1
    
    
    
    9.3
    %
    
    
    17.4
    %Total
    
    $
    307.5
    
    
    
    100.0
    %
    
    $
    259.9
    
    
    
    100.0
    %
    
    
    18.3
    %Product type:Authenticators
    
    $
    151.2
    
    
    
    49.2
    %
    
    $
    129.8
    
    
    
    49.9
    %
    
    
    16.5
    %Software products
    
    
    81.3
    
    
    
    26.4
    %
    
    
    63.9
    
    
    
    24.6
    %
    
    
    27.2
    %Maintenance and professional services
    
    
    75.0
    
    
    
    24.4
    %
    
    
    66.2
    
    
    
    25.5
    %
    
    
    13.3
    %Total
    
    $
    307.5
    
    
    
    100.0
    %
    
    $
    259.9
    
    
    
    100.0
    %
    
    
    18.3
    %Product line:Authentication products
    
    $
    259.0
    
    
    
    84.2
    %
    
    $
    223.4
    
    
    
    86.0
    %
    
    
    15.9
    %Encryption products
    
    
    28.0
    
    
    
    9.1
    %
    
    
    24.0
    
    
    
    9.2
    %
    
    
    16.7
    %Web access management products
    
    
    20.5
    
    
    
    6.7
    %
    
    
    12.5
    
    
    
    4.8
    %
    
    
    64.0
    %Total
    
    $
    307.5
    
    
    
    100.0
    %
    
    $
    259.9
    
    
    
    100.0
    %
    
    
    18.3
    %
  Years Ended December 31,2004
    
    2003
    
    Percentage($ in millions)
    
    Revenue
    
    Percentage
    
    Revenue
    
    Percentage
    
    IncreaseUnited States
    
    $
    172.7
    
    
    
    56.2
    %
    
    $
    155.0
    
    
    
    59.6
    %
    
    
    11.4
    %Europe and other
    
    
    100.6
    
    
    
    32.7
    %
    
    
    80.2
    
    
    
    30.9
    %
    
    
    25.4
    %Asia Pacific
    
    
    34.2
    
    
    
    11.1
    %
    
    
    24.7
    
    
    
    9.5
    %
    
    
    38.5
    %Total
    
    $
    307.5
    
    
    
    100.0
    %
    
    $
    259.9
    
    
    
    100.0
    %
    
    
    18.3
    %
  
    
    We had observed that businesses are continuing the trend toward permitting remote access
to internal resources and Web-enabling existing applications.
    
    Our identity and access management solutions promote our product synergies and enabled us
to generate additional revenue by selling additional products to existing customers.
    
    An increasing number of small and mid-size businesses adopted our authentication products.
    
    Some of our existing larger customers had expanded their deployments of our products.
    
    Our sales to the financial services and technology vertical markets continued to provide increased revenue for us.
  Percentage2004
    
    2003
    
    IncreaseNumber of credentials licensed
    
    
    3,887
    
    
    
    3,132
    
    
    
    24.1
    %
   11




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Gross Profit
  Years Ended December 31,2004
    
    
    2003($ in millions)
    
    Gross Profit
    
    
    Gross Margin

    
    Gross Profit
    
    
    Gross MarginProducts
    
    $
    200.6
    
    
    
    86.3
    %
    
    $
    161.4
    
    
    
    83.3
    %Maintenance and professional services
    
    
    51.7
    
    
    
    68.9
    %
    
    
    45.3
    
    
    
    68.5
    %Total
    
    $
    252.3
    
    
    
    82.0
    %
    
    $
    206.7
    
    
    
    79.5
    %
    Research and Development
  December 31,%($ in millions)
    
    2004
    
    2003
    
    ChangeResearch and development
    
    $
    61.9
    
    
    $
    53.6
    
    
    
    15.4
    %Percentage of revenue
    
    
    20.1
    %
    
    
    20.6
    %
  Marketing and Selling
  December 31,%($ in millions)
    
    2004
    
    2003
    
    ChangeMarketing and selling
    
    $
    110.2
    
    
    $
    94.3
    
    
    
    16.9
    %Percentage of revenue
    
    
    35.9
    %
    
    
    36.3
    %
  12




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General and Administrative
  December 31,%($ in millions)
    
    2004
    
    2003
    
    ChangeGeneral and administrative
    
    $
    32.6
    
    
    $
    33.8
    
    
    
    (3.4
    )%Percentage of revenue
    
    
    10.6
    %
    
    
    13.0
    %
  Restructurings
  Facility Exit
    
    
    
    
    
    LiquidationCosts & Related
    
    
    
    
    
    of SwedenAsset
    
    Severance
    
    Development($ in millions)
    
    Impairments
    
    Costs
    
    Operations
    
    TotalBalance at January 1, 2002
    
    $
    9.8
    
    
    $
    1.3
    
    
    $
    
    
    
    $
    11.1Restructuring charges  2002
    
    
    8.3
    
    
    
    5.7
    
    
    
    4.4
    
    
    
    18.4Revision of previously recorded restructuring charges  2002
    
    
    35.7
    
    
    
    
    
    
    
    1.9
    
    
    
    37.6Payments  2002
    
    
    (5.8
    )
    
    
    (5.6
    )
    
    
    (5.7
    )
    
    
    (17.1
    )Write offs  2002
    
    
    (12.1
    )
    
    
    
    
    
    
    
    
    
    
    (12.1
    )Balance at December 31, 2002
    
    
    35.9
    
    
    
    1.4
    
    
    
    0.6
    
    
    
    37.9Revision of previously recorded restructuring charges  2003
    
    
    0.8
    
    
    
    (0.6
    )
    
    
    (0.2
    )
    
    
    Payments  2003
    
    
    (8.8
    )
    
    
    (0.6
    )
    
    
    (0.4
    )
    
    
    (9.8
    )Write offs  2003
    
    
    (0.2
    )
    
    
    
    
    
    
    
    
    
    
    (0.2
    )Balance at December 31, 2003
    
    
    27.7
    
    
    
    0.2
    
    
    
    
    
    
    
    27.9Revision of previously recorded restructuring charges  2004
    
    
    1.0
    
    
    
    (0.2
    )
    
    
    
    
    
    
    0.8Payments  2004
    
    
    (9.0
    )
    
    
    
    
    
    
    
    
    
    
    (9.0
    )Write offs  2004
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Balance at December 31, 2004
    
    $
    19.7
    
    
    $
    
    
    
    $
    
    
    
    $
    19.7
      13




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##### Table of Contents



Interest Expense and Other
  Years Ended December 31,($ in millions)
    
    2004
    
    2003Interest expense on 7% convertible debentures
    
    $
    (4.2
    )
    
    $
    (5.7
    )Non cash amortization of deferred financing costs
    
    
    (1.3
    )
    
    
    (1.6
    )Non cash accretion of warrant value
    
    
    (1.1
    )
    
    
    (1.4
    )Interest income net of expense and other
    
    
    3.6
    
    
    
    1.3Unrealized loss from foreign currency translation
    
    
    (0.3
    )
    
    
    (0.6
    )Total interest expense and other
    
    $
    (3.3
    )
    
    $
    (8.0
    )
  Income from Investing Activities
  Provision for Income Taxes
   14




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##### Table of Contents



Liquidity and Capital Resources
 Summary of Sources and Uses of Cash
  Years Ended December 31,($ in millions)
    
    2005
    
    2004Net cash provided by operating activities
    
    $
    56.1
    
    
    $
    53.0Net cash used for investing activities
    
    
    (36.7
    )
    
    
    (234.0
    )Net cash (used for) provided by financing activities
    
    
    (18.0
    )
    
    
    42.5Increase (decrease) in cash and cash equivalents
    
    
    0.8
    
    
    
    (139.1
    )
      15




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##### Table of Contents



Payments Due by PeriodLess Than
    
    1 - 3
    
    3 - 5
    
    More Than($ in millions)
    
    Total
    
    1 Year
    
    Years
    
    Years
    
    5 YearsOperating leases
    
    $
    128.8
    
    
    $
    14.7
    
    
    $
    41.6
    
    
    $
    61.6
    
    
    $
    10.9Restructurings
    
    
    15.8
    
    
    
    6.0
    
    
    
    9.8
    
    
    
    
    
    
    
    Purchase obligations
    
    
    2.6
    
    
    
    0.7
    
    
    
    1.9
    
    
    
    
    
    
    
    Royalty commitments
    
    
    6.2
    
    
    
    3.0
    
    
    
    2.7
    
    
    
    0.5
    
    
    
    Total commitments
    
    $
    153.4
    
    
    $
    24.4
    
    
    $
    56.0
    
    
    $
    62.1
    
    
    $
    10.9
     Off Balance Sheet Arrangements
  Quarterly Financial Data (Unaudited)
 2005
    
    First Quarter
    
    Second Quarter
    
    Third Quarter
    
    Fourth QuarterRevenue
    
    $
    75,618
    
    
    $
    76,528
    
    
    $
    76,237
    
    
    $
    81,732Gross profit
    
    
    60,811
    
    
    
    60,273
    
    
    
    60,112
    
    
    
    63,290Income before provision for income taxes
    
    
    9,259
    
    
    
    10,856
    
    
    
    11,781
    
    
    
    13,479Net income
    
    
    7,222
    
    
    
    8,468
    
    
    
    15,063
    
    
    
    11,682Basic earnings per share
    
    $
    0.10
    
    
    $
    0.12
    
    
    $
    0.21
    
    
    $
    0.16Diluted earnings per share
    
    $
    0.10
    
    
    $
    0.12
    
    
    $
    0.21
    
    
    $
    0.162004Revenue
    
    $
    71,968
    
    
    $
    75,577
    
    
    $
    76,731
    
    
    $
    83,231Gross profit
    
    
    58,142
    
    
    
    62,114
    
    
    
    62,905
    
    
    
    69,113Income before provision for income taxes
    
    
    8,069
    
    
    
    9,971
    
    
    
    11,056
    
    
    
    14,555Net income
    
    
    6,455
    
    
    
    7,976
    
    
    
    8,741
    
    
    
    11,810Basic earnings per share
    
    $
    0.11
    
    
    $
    0.13
    
    
    $
    0.14
    
    
    $
    0.17Diluted earnings per share
    
    $
    0.10
    
    
    $
    0.12
    
    
    $
    0.13
    
    
    $
    0.16
 16




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##### Table of Contents



ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
  Financial Statements.
      Financial Statement Schedule.
 Exhibits.
 17




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##### Table of Contents



SIGNATURES
  RSA Security Inc.By:
    
    /s/ Arthur W. Coviello, Jr.Arthur W. Coviello, Jr.Chief Executive Officer and President
  18




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##### Table of Contents



EXHIBIT INDEX
 2.1
    
    Agreement and Plan of Merger, dated December 2, 2005, among RSA Security Inc., Cyota, Inc., Powder
Acquisition Corporation and Andrew Zalasin in his capacity as the Cyota stockholders representative is
incorporated herein by reference to Exhibit 2.1 to Amendment No. 1 to RSA Securitys Current Report on
Form 8-K/A filed with the SEC on December 7, 2005.3.1
    
    Our Third Restated Certificate of Incorporation, as amended, is incorporated herein by reference to
Exhibit 3.1 to our Quarterly Report on Form 10-Q for the quarter ended June 30, 2000 (SEC file no.
000-25120).3.2
    
    Our Amended and Restated By-Laws, as amended, is incorporated herein by reference to Exhibit 3.3 to our
Registration Statement on Form S-1 (SEC file no. 33-85606) (the Form S-1).4.1
    
    Specimen Certificate for shares of our common stock, $.01 par value per share, is incorporated herein by
reference to Exhibit 4.1 to our Current Report on Form 8-K dated September 10, 1999 (SEC file no.
000-25120).4.2
    
    Rights Agreement, dated as of July 20, 1999, between RSA Security and State Street Bank and Trust
Company, which includes as Exhibit A the Form of Rights Certificate and as Exhibit B the Summary of
Rights to Purchase Common Stock, is incorporated herein by reference to Exhibit 1 to our Registration
Statement on Form 8-A (SEC file no. 000-25120) filed on July 23, 1999.4.3
    
    Amendment to Rights Agreement, dated as of November 2, 2001, among RSA Security, State Street Bank and
Trust Company and EquiServe Trust Company, N.A. is incorporated herein by reference to Exhibit 4.1 to our
Current Report on Form 8-K dated November 2, 2001.4.4
    
    Amendment No. 2 to Rights Agreement, dated as of March 19,2002, between RSA Security and EquiServe Trust
Company, N.A. is incorporated herein by reference to Exhibit 4.2 to our Current Report on Form 8-K dated
November 2, 2001.4.5
    
    Form of Warrant to Purchase Common Stock is incorporated herein by reference to Exhibit 99.4 to our
Current Report on Form 8-K dated November 5, 2001.*10.1
    
    2005 Stock Incentive Plan is incorporated herein by reference to Appendix B to our Definitive Schedule
14A filed with the SEC on April 15, 2005 (SEC file no. 000-25120).*10.2
    
    Form of Non-Statutory Stock Option Agreement under our 2005 Stock Incentive Plan was previously filed
with our Annual Report on Form 10-K for the year ended December 31, 2005.*10.3
    
    Form of Restricted Stock Agreement under our 2005 Stock Incentive Plan was previously filed with our
Annual Report on Form 10-K for the year ended December 31, 2005.*10.4
    
    Amended and Restated 1998 Non-Officer Employee Stock Incentive Plan, as amended, is incorporated herein
by reference to Exhibit 10.4 to our Quarterly Report on Form 10-Q for the quarter ended June 30, 2005.*10.5
    
    1994 Employee Stock Purchase Plan, as amended, is incorporated herein by reference to Exhibit 10 to our
Current Report on Form 8-K dated January 16, 2006.*10.6
    
    1994 Stock Option Plan, as amended  1998 Restatement, as amended, is incorporated herein by reference to
Appendix A to our Preliminary Schedule 14A filed March 5, 1999. (SEC file no. 000-25120)*10.7
    
    1994 Director Stock Option Plan, as amended, is incorporated herein by reference to Exhibit 10.1 to our
Quarterly Report on Form 10-Q for the quarter ended March 31, 2003.*10.8
    
    2000 Deferred Compensation Plan is incorporated herein by reference to Exhibit 10.1 to our Quarterly
Report on Form 10-Q for the quarter ended March 31, 2000 (SEC file no. 000-25120).*10.9
    
    First Amendment to our 2000 Deferred Compensation Plan is incorporated herein by reference to Exhibit
10.6 to our Annual Report on Form 10-K for the year ended December 31, 2002.*10.10
    
    Second Amendment to our 2000 Deferred Compensation Plan is incorporated herein by reference to Exhibit
10.2 to our Quarterly Report on Form 10-Q for the quarter ended March 31, 2003.*10.11
    
    Third Amendment to our 2000 Deferred Compensation Plan is incorporated herein by reference to Exhibit
10.1 to our Current Report on Form 8-K dated September 28, 2004.*10.12
    
    Fourth Amendment to our 2000 Deferred Compensation Plan was previously filed with our Annual Report on
Form 10-K for the year ended December 31, 2005.*10.13
    
    RSA Security Inc. Grantor Trust Agreement, dated March 13, 2000, between RSA Security and Wachovia Bank,
N.A. is
 19




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##### Table of Contents



incorporated herein by reference to Exhibit 10.2 to our Quarterly Report on Form 10-Q for the
quarter ended March 31, 2000 (SEC file no. 000-25120).*10.14
    
    Employment Agreement, dated as of April 1, 2000, between RSA Security and Arthur W. Coviello, Jr. is
incorporated herein by reference to Exhibit 10.2 to our Quarterly Report on Form 10-Q for the quarter
ended June 30, 2000 (SEC file no. 000-25120).*10.15
    
    Third Amended and Restated Employment Agreement, dated as of December 27, 2001, between RSA Security and
Charles R. Stuckey, Jr. is incorporated herein by reference to Exhibit 10.9 to our Annual Report on Form
10-K for the year ended December 31, 2001.*10.16
    
    Letter agreement, dated July 19, 2005, between RSA Security Inc. and Charles R. Stuckey, Jr. is
incorporated herein by reference to Exhibit 10.1 to our Current Report on Form 8-K dated July 19, 2005.*10.17
    
    A summary of our 2006 Executive Incentive Compensation Plan is incorporated herein by reference to
Exhibit 10.1 to our Current Report on Form 8-K dated February 14, 2006.10.18
    
    Progress Software Application Partner Agreement, dated December 5, 1994, as amended, between RSA Security
and Progress Software Corporation is incorporated herein by reference to Exhibit 10.17 to the Form S-1.10.19
    
    Second Amendment to Progress Software Application Partner Agreement, dated as of November 29, 1995,
between RSA Security and Progress Software Corporation is incorporated herein by reference to Exhibit
10.3 to our Quarterly Report on Form 10-Q for the quarter ended June 30, 1997 (SEC file no. 000-25120).10.20
    
    Third Amendment to Progress Software Application Partner Agreement, dated as of November 15, 1996,
between RSA Security and Progress Software Corporation is incorporated herein by reference to Exhibit
10.4 to our Quarterly Report on Form 10-Q for the quarter ended June 30, 1997 (SEC file no. 000-25120).10.21
    
    Fourth Amendment to Progress Software Application Partner Agreement, dated as of April 1, 1998, between
RSA Security and Progress Software Corporation is incorporated herein by reference to Exhibit 10.1 to our
Quarterly Report on Form 10-Q for the quarter ended June 30, 1998 (SEC file no. 000-25120).10.22
    
    Fifth Amendment to Progress Software Application Partner Agreement, dated as of February 18, 1999,
between RSA Security and Progress Software Corporation is incorporated herein by reference to Exhibit
10.22 to our Annual Report on Form 10-K for the year ended December 31, 1999. (SEC file no. 000-25120).10.23
    
    Sixth Amendment to Progress Software Application Partner Agreement, dated as of October 26, 1999, between
RSA Security and Progress Software Corporation is incorporated herein by reference to Exhibit 10.23 to
our Annual Report on Form 10-K for the year ended December 31, 1999 (SEC file no. 000-25120).10.24
    
    Seventh Amendment to Progress Software Application Partner Agreement, dated as of November 28, 2001,
between RSA Security and Progress Software Corporation is incorporated herein by reference to Exhibit
10.16 to our Annual Report on Form 10-K for the year ended December 31, 2001.10.25
    
    Eighth Amendment to Progress Software Application Partner Agreement, dated as of November 27, 2002,
between RSA Security and Progress Software Corporation is incorporated herein by reference to Exhibit
10.17 to our Annual Report on Form 10-K for the year ended December 31, 2002.10.26
    
    Ninth Amendment to Progress Software Application Partner Agreement, dated as of December 2, 2003, between
RSA Security and Progress Software Corporation is incorporated herein by reference to Exhibit 10.19 to
our Annual Report on Form 10-K for the year ended December 31, 2003.10.27
    
    Tenth Amendment to Progress Software Application Partner Agreement, dated as of November 30, 2004,
between RSA Security and Progress Software Corporation is incorporated herein by reference to Exhibit
10.22 to our Annual Report on Form 10-K for the year ended December 31, 2004.10.28
    
    Eleventh Amendment to Progress Software Application Partner Agreement, dated as of June 1, 2005, between
RSA Security and Progress Software Corporation is incorporated herein by reference to Exhibit 10.1 to our
Quarterly Report on Form 10-Q for the quarter ended June 30, 2005.#10.29
    
    Amendment One, dated January 20, 2006, to Manufacturing Agreement between RSA Security and Flextronics
International Marketing (L) Ltd. was previously filed with our Annual Report on Form 10-K for the year
ended December 31, 2005.10.30
    
    Lease, dated as of November 16, 2000, between RSA Security and Bedford Woods Limited Partnership I is
incorporated herein by reference to Exhibit 10.31 to our Annual Report on Form 10-K for the year ended
December 31, 2000 (SEC file no. 000-25120).
 20




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##### Table of Contents



10.31
    
    Lease, dated as of November 17, 2000, between RSA Security and Bedford Woods Limited Partnership I is
incorporated herein by reference to Exhibit 10.32 to our Annual Report on Form 10-K for the year ended
December 31, 2000 (SEC file no. 000-25120).10.32
    
    Indenture of Lease, dated as of March 11, 1996, between RSA Security and Beacon Properties, L.P. is
incorporated herein by reference to Exhibit 10.17 to our Registration Statement on Form S-4 (File No.
333-7265).10.33
    
    Rider to Indenture of Lease, dated as of March 11, 1996 between RSA Security and Beacon Properties, L.P.
is incorporated herein by reference to Exhibit 10.6 to our Quarterly Report on Form 10-Q for the quarter
ended March 31, 1998 (SEC file no. 000-25120).10.34
    
    First Amendment to Lease, dated as of May 10, 1997, between RSA Security and Beacon Properties, L.P. is
incorporated herein by reference to Exhibit 10.2 to our Quarterly Report on Form 10-Q for the quarter
ended June 30, 1997 (SEC file no. 000-25120).10.35
    
    Second Amendment to Lease, dated as of April 8, 1998, between RSA Security and EOP  Crosby Corporate
Center, L.L.C. is incorporated herein by reference to Exhibit 10.5 to our Quarterly Report on Form 10-Q
for the quarter ended March 31, 1998 (SEC file no. 000-25120).10.36
    
    Third Amendment to Lease, dated as of May 9, 2000, between RSA Security and EOP  Crosby Corporate
Center, L.L.C. is incorporated herein by reference to Exhibit 10.4 to our Quarterly Report on Form 10-Q
for the quarter ended June 30, 2000 (SEC file no. 000-25120).10.37
    
    Agreement of Sublease, dated as of December 10, 2003, between RSA Security and 170 Systems, Inc. is
incorporated herein by reference to Exhibit 10.29 to our Annual Report on Form 10-K for the year ended
December 31, 2003.10.38
    
    Agreement of Sublease, dated as of May 4, 2004, between RSA Security and Empirix Inc. is incorporated
herein by reference to Exhibit 10.1 to our Quarterly Report on Form 10-Q for the quarter ended June 30,
2003.10.39
    
    Agreement of Sublease, dated as of March 31, 2004 between RSA Security and iPhrase Technologies, Inc. is
incorporated herein by reference to Exhibit 10.2 to our Quarterly Report on Form 10-Q for the quarter
ended June 30, 2003.21.1
    
    Subsidiaries of RSA Security was previously filed with our Annual Report on Form 10-K for the year ended
December 31, 2005.23.1
    
    Consent of Deloitte & Touche LLP, Independent Registered Public Accounting Firm, was previously filed
with our Annual Report on Form 10-K for the year ended December 31, 2005.31.1
    
    Certification of our CEO, dated March 13, 2006, pursuant to Rule 13a-14(a) of the Securities Exchange Act
of 1934, as amended, was previously filed with our Annual Report on Form 10-K for the year ended December
31, 2005.31.2
    
    Certification of our CFO, dated March 13, 2006, pursuant to Rule 13a-14(a) of the Securities Exchange Act
of 1934, as amended, was previously filed with our Annual Report on Form 10-K for the year ended December
31, 2005.31.3
    
    Certification of our CEO pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended.31.4
    
    Certification of our CFO pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended.32.2
    
    Certifications of our CEO and CFO pursuant to 18 U.S.C. §1350 were previously filed with our Annual
Report on Form 10-K for the year ended December 31, 2005 and are incorporated herein by reference.
 
 *
    
    Management contract or compensatory plan or arrangement.
    
    Confidential treatment previously granted by the Securities and Exchange Commission as to certain portions.#
    
    Confidential treatment requested as to certain portions. 21