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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTIONS 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): July 23, 2007
AVID TECHNOLOGY, INC.
(Exact Name of Registrant as Specified in Its Charter)
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Delaware |
0-21174 |
04-2977748 | |||
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Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
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Pre-commencement communications pursuant to Rule 14d-2 (b) under the Exchange Act (17 CFR 240.14d-2(b)) |
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
This Current Report on Form 8-K contains a number of forward-looking statements, as defined by the Private Securities Litigation Reform Act of 1995, about the performance of Avid Technology, Inc. (the “Company”). For this purpose, any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the foregoing, the words “believes,” “anticipates,” “plans,” “expects” and similar expressions are intended to identify forward-looking statements. There are a number of factors that could cause actual events or results to differ materially from those indicated by such forward-looking statements, many of which are beyond the Company’s control, including the risk factors disclosed previously and from time to time in the Company’s filings with the U.S. Securities and Exchange Commission. In addition, the forward-looking statements contained herein represent the Company’s estimate only as of the date of this filing and should not be relied upon as representing the Company’s estimate as of any subsequent date. While the Company may elect to update these forward-looking statements at some point in the future, the Company specifically disclaims any obligation to do so to reflect actual results, changes in assumptions or changes in other factors affecting such forward-looking statements.
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Item 2.02. |
Results of Operations and Financial Condition. |
On July 26, 2007, the Company announced its financial results for the quarter ended June 30, 2007. The full text of the press release issued in connection with the announcement is furnished as Exhibit 99.1 to this Current Report on Form 8-K.
The information contained in Item 2.02 of this Form 8-K (including Exhibit 99.1) 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.
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Item 2.05. |
Costs Associated with Exit or Disposal Activities. |
On July 26, 2007, the Company announced a corporate restructuring plan, approved by the Company’s Board of Directors on July 23, 2007, that is intended to enable the Company’s Professional Video and Consumer Video business units to better serve their respective customers.
In connection with the restructuring, the company intends to eliminate duplicative business functions, improve operational efficiencies and better align key business skill sets with future opportunities. The restructuring will include an reduction in force of approximately 150 positions across the Company. The restructuring will also include the reduction of office space at the Company’s facilities in Tewksbury, Massachusetts; Mountain View, California; and Munich, Germany. The Company anticipates that it will complete the restructuring by January 2008.
In connection with the restructuring, the Company expects to incur, (i) with respect to its Professional Video business unit, expenses relating to termination benefits of $2.9 million to $3.5 million, expenses relating to facilities reduction of $2.8 million to $3.5 million and other miscellaneous expenses of $0.5 to $1.0 million, and (ii) with respect to its Consumer Video business unit, expenses relating to termination benefits of $1.4 million to $1.6 million and expenses relating to facilities reduction of $0.4 million. The Company expects to incur total expenses relating to the restructuring of $8.0 million to $10.0 million, which, with the exception of miscellaneous expenses of up to $0.5 million, represent cash expenditures. The Company expects to record the majority of these restructuring charges in the quarter ending September 30, 2007.
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Item 9.01. |
Financial Statements and Exhibits. |
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(d) |
Exhibits. |
The following exhibit relating to Item 2.02 shall be deemed to be furnished, and not filed:
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99.1 |
Press Release issued by the Company on July 26, 2007. |
3
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.
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Date: July 26, 2007 |
AVID TECHNOLOGY, INC. | |
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4
EXHIBIT INDEX
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Exhibit No. |
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Description |
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99.1 |
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Press release issued by the Company dated July 26, 2007. |
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5
EXHIBIT 99.1
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Contact: |
Dean Ridlon, Investor Relations Director |
Phone: 978.640.5309
Email: Investor_Relations@avid.com
Avid Reports Second Quarter 2007 Results
Appoints Joel Legon as CFO
Tewksbury, MA – July 26, 2007 – Avid Technology, Inc. (NASDAQ: AVID) today reported revenue of $225.3 million for the three-month period ended June 30, 2007, compared to $222.2 million for the same period in 2006. GAAP net loss for the quarter was $6.0 million, or $.15 per share, compared to GAAP net income of $2.7 million, or $.06 per diluted share, in the second quarter of 2006.
GAAP net income in the second quarter of 2007 includes $14.2 million of amortization, stock-based compensation, restructuring charges, legal settlements and related tax adjustments. Excluding these items, non-GAAP earnings per diluted share were $.20. For the second quarter of 2006, there was $11.8 million of amortization, stock-based compensation and related tax adjustments included in GAAP net income. Excluding these items, non-GAAP earnings per share were $.34 in the second quarter of 2006.
Avid also announced the appointment of Joel Legon to serve as the company's vice president and chief financial officer. Since joining Avid in March 2006, Legon had served as vice president and corporate controller. He had additionally served as acting chief financial officer since March 2007.
“I am pleased to report a solid Q2, with revenue and profit that were in line with our expectations,” said David Krall, who will be stepping down as president and chief executive officer on July 31. “Our Video division recognized several large deals out of backlog, including France 24, one of the largest orders in our history. In Audio, which is our most consistent and profitable segment, revenue was flat organically and up 3% year-on-year including revenue generated from Sibelius. In our Consumer segment, lower sales of the TV viewing line in Europe were counterbalanced by strong sales and market share growth of our flagship Studio 11 consumer video editor.”
“With a strong balance sheet, innovative products and world-class customers, Avid is well positioned as a leader in the media and entertainment industry,” said Nancy Hawthorne, who will take over as interim chief executive officer on August 1. “Our customers are looking to Avid to extend that leadership into new areas as their
businesses evolve. By aligning ourselves more closely with our customers’ business opportunities, and taking a fresh approach to our own business processes, we believe we can deliver more value to both our customers and our shareholders.”
The company also announced a strategic realignment that will result in restructuring charges of between $8 and $10 million, $1.5 million of which was recorded in Q2. This action includes the transition of video server engineering from Mountain View, CA to existing Avid facilities in Edmonton, Canada and Tewksbury, MA; a reduction in space within certain facilities; and a reduction in force of approximately 150 positions, primarily, but not exclusively, in the company’s Video business unit.
Revenue for the six-month period ended June 30, 2007 was $444.2 million, compared to revenue of $440.3 million for the same period in 2006. GAAP net loss for the first six months of 2007 was $6 million, or $.15 per share, compared to GAAP net income of $6.0 million, or $.14 per diluted share, for the same period in 2006. GAAP net loss for the six-month period ended June 30, 2007 includes $24.8 million of amortization, stock-based compensation, restructuring charges, legal settlements and related tax adjustments. Excluding these items, non-GAAP earnings per share were $.45 per diluted share for the first half of 2007. GAAP net income for the six-month period ended June 30, 2006 includes $24.6 million of amortization, stock-based compensation, restructuring charges, in-process research and development and related tax adjustments. Excluding these items non-GAAP earnings per share were $.71 for the first half of 2006.
Use of Non-GAAP Financial Measures
This press release contains “non-GAAP financial measures” under the rules of the U.S. Securities and Exchange Commission. This non-GAAP information supplements, and is not intended to represent a measure of performance in accordance with, disclosures required by generally accepted accounting principles, or GAAP. The reconciliation for net income and diluted earnings per share for the three and six-month periods ended June 30, 2007 and 2006 are in the tables attached to this press release.
We use non-GAAP financial measures internally to manage our business, for example, in establishing our annual operating budget, in assessing segment operating performance and for measuring performance under our employee incentive compensation plans. Non-GAAP financial measures are used by our management in its operating and financial decision-making because management believes these measures reflect our ongoing business in a manner that allows meaningful period-to-period comparisons. Accordingly, we believe it is useful for our investors and others to review both GAAP and non-GAAP measures in order to (a) understand and evaluate our current operating performance and future prospects in the same manner as management does and (b) compare in a consistent manner the company’s current financial results with our past financial results. The primary limitations associated with our use of non-GAAP financial measures are that these measures may not be directly comparable to the amounts reported by other companies and they do not include all items of income and
expense that affect our operations. Our management compensates for these limitations by considering the company’s financial results as determined in accordance with GAAP and by providing a detailed reconciliation of the non-GAAP financial measures to the most directly comparable GAAP measures in this press release.
Conference Call
A conference call to discuss Avid’s second quarter 2007 financial results will be held today, July 26, 2007, at 5:00 p.m. EDT. The call will be open to the public and can be accessed by dialing (719) 457-2727 and referencing confirmation code 2323418. The call and subsequent replay will also be available on Avid’s website. To listen via this alternative, go to the Investor Relations page under the About Us menu at www.avid.com for complete details prior to the start of the conference call.
Use of Forward-Looking Statements
The above release is subject to the completion and filing of our Quarterly Report on Form 10-Q. This release includes forward-looking statements, as defined by the Private Securities Litigation Reform Act of 1995, about Avid’s performance. There are a number of factors that could cause actual events or results to differ materially from those indicated by such forward-looking statements, such as Avid’s ability to meet customer needs, market acceptance of Avid’s existing and new products, Avid’s ability to recognize revenue in a timely manner, competitive factors, including pricing pressures, delays in product shipments and other important events and factors disclosed previously and from time to time in Avid’s filings with the U.S. Securities and Exchange Commission. In addition, the forward-looking statements contained herein represent Avid’s estimate only as of today and should not be relied upon as representing the company’s estimate as of any subsequent date. While Avid may elect to update these forward-looking statements at some point in the future, Avid specifically disclaims any obligation to do so, even if the estimate changes.
About Avid Technology, Inc.
Avid Technology, Inc. is the world leader in digital nonlinear media creation, management, and distribution solutions, enabling film, video, audio, animation, games and broadcast professionals to work more efficiently, productively and creatively. For more information about the company’s Oscar®, Grammy®, and Emmy® award-winning products and services, please visit: www.avid.com.
© 2007 Avid Technology, Inc. All rights reserved. Avid, Digidesign, Film Composer and Pro Tools are either registered trademarks or trademarks of Avid Technology, Inc. or its subsidiaries in the United States and/or other countries. Avid received an Oscar statuette representing the 1998 Scientific and Technical Award for the concept, design, and engineering of the Avid® Film Composer® system for motion picture editing. Digidesign, Avid’s audio division, received an Oscar statuette representing the 2003 Scientific and Technical Award for the design, development, and implementation of its Pro Tools® digital audio workstation. Oscar is a trademark and service mark of the Academy of Motion Picture Arts and Sciences. Emmy is a registered trademark of ATAS/NATAS. Grammy is a trademark of the National Academy of Recording Arts and Sciences, Inc. All other trademarks contained herein are the property of their respective owners.
AVID TECHNOLOGY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited - in thousands, except per share data)
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Three Months Ended |
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Six Months Ended |
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June 30, |
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June 30, |
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2007 |
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2006 |
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2007 |
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2006 |
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Net revenues |
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Products |
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$ |
192,370 |
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$ |
197,960 |
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$ |
384,813 |
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$ |
392,323 |
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Services |
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32,956 |
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24,266 |
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59,411 |
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47,973 |
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Total net revenues |
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225,326 |
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222,226 |
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444,224 |
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440,296 |
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Cost of revenues |
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Products |
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92,991 |
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93,819 |
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185,703 |
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185,180 |
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Services |
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17,454 |
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13,812 |
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33,433 |
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27,127 |
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Amortization of intangible assets |
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4,761 |
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5,016 |
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9,233 |
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10,096 |
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Total cost of revenues |
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115,206 |
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112,647 |
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228,369 |
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222,403 |
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Gross profit |
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110,120 |
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109,579 |
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215,855 |
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217,893 |
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Operating expenses |
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Research and development |
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38,444 |
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35,617 |
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76,186 |
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71,113 |
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Marketing and selling |
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56,505 |
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52,583 |
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108,199 |
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102,495 |
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General and administrative |
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17,698 |
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15,853 |
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35,550 |
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30,990 |
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Amortization of intangible assets |
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3,431 |
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3,977 |
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6,863 |
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7,642 |
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Restructuring costs, net |
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1,517 |
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– |
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1,775 |
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1,066 |
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In-process research and development |
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– |
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– |
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– |
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310 |
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Total operating expenses |
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117,595 |
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108,030 |
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228,573 |
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213,616 |
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Operating income (loss) |
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(7,475 |
) |
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1,549 |
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(12,718 |
) |
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4,277 |
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Interest and other income (expense), net |
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2,023 |
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1,881 |
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3,918 |
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3,852 |
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Income (loss) before income taxes |
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(5,452 |
) |
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3,430 |
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(8,800 |
) |
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8,129 |
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Provision for (benefit from) income taxes |
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547 |
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731 |
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(2,821 |
) |
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2,084 |
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Net income (loss) |
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$ |
(5,999 |
) |
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$ |
2,699 |
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$ |
(5,979 |
) |
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$ |
6,045 |
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Net income (loss) per common share – basic |
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$ |
(0.15 |
) |
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$ |
0.06 |
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$ |
(0.15 |
) |
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$ |
0.14 |
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Net income (loss) per common share – diluted |
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$ |
(0.15 |
) |
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$ |
0.06 |
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$ |
(0.15 |
) |
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$ |
0.14 |
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Weighted-average common shares outstanding – basic |
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40,940 |
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42,273 |
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41,046 |
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42,205 |
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Weighted-average common shares outstanding – diluted |
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40,940 |
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43,057 |
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41,046 |
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43,126 |
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AVID TECHNOLOGY, INC.
(unaudited - in thousands, except per share data)
Segment revenue and operating income (loss):
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Three Months Ended |
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Six Months Ended |
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June 30, |
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June 30, |
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2007 |
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2006 |
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2007 |
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2006 |
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Professional Video |
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Revenue |
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$ |
120,318 |
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$ |
118,864 |
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$ |
232,989 |
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$ |
235,064 |
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Operating income |
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|
2,340 |
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|
7,297 |
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|
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|
3,916 |
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|
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|
18,400 |
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|
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Audio |
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Revenue |
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$ |
76,763 |
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|
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$ |
74,262 |
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$ |
155,686 |
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|
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$ |
147,009 |
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Operating income |
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|
6,432 |
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|
9,337 |
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|
13,698 |
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|
18,090 |
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Consumer Video |
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Revenue |
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$ |
28,245 |
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$ |
29,100 |
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$ |
55,549 |
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$ |
58,223 |
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Operating loss |
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(962 |
) |
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(1,809 |
) |
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(3,333 |
) |
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|
(4,381 |
) |
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Total |
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Total segment revenue |
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$ |
225,326 |
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$ |
222,226 |
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$ |
444,224 |
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$ |
440,296 |
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Total segment operating income |
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7,810 |
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|
14,825 |
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|
|
14,281 |
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|
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|
32,109 |
|
Reconciliation of GAAP operating income to Non-GAAP operating income:
|
|
|
Three Months Ended |
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Six Months Ended |
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|
|
June 30, |
|
|
|
June 30, |
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|
|
|
2007 |
|
|
|
2006 |
|
|
|
2007 |
|
|
|
2006 |
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated GAAP operating income (loss) |
|
$ |
(7,475 |
) |
|
|
$ |
1,549 |
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|
|
$ |
(12,718 |
) |
|
|
$ |
4,277 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments to reconcile to Non-GAAP operating income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of intangible assets |
|
|
8,192 |
|
|
|
|
8,993 |
|
|
|
|
16,096 |
|
|
|
|
17,738 |
|
|
Stock-based compensation |
|
|
4,551 |
|
|
|
|
4,283 |
|
|
|
|
8,103 |
|
|
|
|
8,718 |
|
|
Restructuring costs, net |
|
|
1,517 |
|
|
|
|
– |
|
|
|
|
1,775 |
|
|
|
|
1,066 |
|
|
Legal settlements |
|
|
1,025 |
|
|
|
|
– |
|
|
|
|
1,025 |
|
|
|
|
– |
|
|
In-process research and development |
|
|
– |
|
|
|
|
– |
|
|
|
|
– |
|
|
|
|
310 |
|
|
Total operating income for reportable segments |
|
$ |
7,810 |
|
|
|
$ |
14,825 |
|
|
|
$ |
14,281 |
|
|
|
$ |
32,109 |
|
AVID TECHNOLOGY, INC.
(unaudited - in thousands, except per share data)
Reconciliation of GAAP net income to Non-GAAP net income:
|
|
|
Three Months Ended |
|
|
|
Six Months Ended |
| ||||||||||||
|
|
|
June 30, |
|
|
|
June 30, |
| ||||||||||||
|
|
|
2007 |
|
|
|
2006 |
|
|
|
2007 |
|
|
|
2006 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP net income (loss) |
|
$ |
(5,999 |
) |
|
|
$ |
2,699 |
|
|
|
$ |
(5,979 |
) |
|
|
$ |
6,045 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments to reconcile to Non-GAAP net income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of intangible assets |
|
|
8,192 |
|
|
|
|
8,993 |
|
|
|
|
16,096 |
|
|
|
|
17,738 |
|
|
Stock-based compensation |
|
|
4,551 |
|
|
|
|
4,283 |
|
|
|
|
8,103 |
|
|
|
|
8,718 |
|
|
Restructuring costs, net |
|
|
1,517 |
|
|
|
|
– |
|
|
|
|
1,775 |
|
|
|
|
1,066 |
|
|
Legal settlements |
|
|
1,025 |
|
|
|
|
– |
|
|
|
|
1,025 |
|
|
|
|
– |
|
|
In-process research and development |
|
|
– |
|
|
|
|
– |
|
|
|
|
– |
|
|
|
|
310 |
|
|
Related tax adjustments |
|
|
(1,099 |
) |
|
|
|
(1,481 |
) |
|
|
|
(2,214 |
) |
|
|
|
(3,251 |
) |
|
Non-GAAP net income |
|
$ |
8,187 |
|
|
|
$ |
14,494 |
|
|
|
$ |
18,806 |
|
|
|
$ |
30,626 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average common shares outstanding – diluted |
|
|
41,157 |
|
|
|
|
43,057 |
|
|
|
|
41,653 |
|
|
|
|
43,126 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP net income per common share – diluted |
|
$ |
0.20 |
|
|
|
$ |
0.34 |
|
|
|
$ |
0.45 |
|
|
|
$ |
0.71 |
|
Stock-based compensation, which relates to adoption of SFAS 123R, the acquisition of M-Audio, and the issuance of restricted stock and restricted stock units in Q3 2006 and Q3 YTD 2006, is comprised of the following:
|
Stock-based compensation included in: |
|
Three Months Ended |
|
Six Months Ended | ||||||||
|
|
|
2007 |
|
2006 |
|
2007 |
|
2006 | ||||
|
Cost of products revenues |
|
$ |
182 |
|
$ |
131 |
|
$ |
323 |
|
$ |
270 |
|
Cost of services revenues |
|
|
251 |
|
|
208 |
|
|
448 |
|
|
427 |
|
Research and development expense |
|
|
1,354 |
|
|
1,244 |
|
|
2,397 |
|
|
2,550 |
|
Marketing and selling expense |
|
|
1,201 |
|
|
1,187 |
|
|
2,136 |
|
|
2,448 |
|
General and administrative expense |
|
|
1,563 |
|
|
1,513 |
|
|
2,799 |
|
|
3,023 |
|
|
|
$ |
4,551 |
|
$ |
4,283 |
|
$ |
8,103 |
|
$ |
8,718 |
AVID TECHNOLOGY, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited - in thousands)
|
|
|
June 30, |
|
|
|
December 31, |
| ||
|
|
|
2007 |
|
|
|
2006 |
| ||
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
|
|
Cash, cash equivalents and marketable securities |
|
$ |
160,048 |
|
|
|
$ |
172,107 |
|
|
Accounts receivable, net of allowances of $19,333 and $23,087 |
|
|
|
|
|
|
|
|
|
|
at June 30, 2007 and December 31, 2006, respectively |
|
|
138,450 |
|
|
|
|
138,578 |
|
|
Inventories |
|
|
140,290 |
|
|
|
|
144,238 |
|
|
Prepaid and other current assets |
|
|
35,772 |
|
|
|
|
29,016 |
|
|
Total current assets |
|
|
474,560 |
|
|
|
|
483,939 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, net |
|
|
45,004 |
|
|
|
|
40,483 |
|
|
Intangible assets, net |
|
|
85,952 |
|
|
|
|
102,048 |
|
|
Goodwill |
|
|
360,550 |
|
|
|
|
360,143 |
|
|
Other assets |
|
|
10,713 |
|
|
|
|
10,421 |
|
|
Total assets |
|
$ |
976,779 |
|
|
|
$ |
997,034 |
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
32,090 |
|
|
|
$ |
34,108 |
|
|
Accrued expenses and other current liabilities |
|
|
82,257 |
|
|
|
|
88,331 |
|
|
Deferred revenues |
|
|
79,235 |
|
|
|
|
73,743 |
|
|
Total current liabilities |
|
|
193,582 |
|
|
|
|
196,182 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term liabilities |
|
|
18,190 |
|
|
|
|
20,471 |
|
|
Total liabilities |
|
|
211,772 |
|
|
|
|
216,653 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ equity: |
|
|
|
|
|
|
|
|
|
|
Common stock |
|
|
423 |
|
|
|
|
423 |
|
|
Additional paid-in capital |
|
|
960,345 |
|
|
|
|
952,763 |
|
|
Accumulated deficit |
|
|
(146,298 |
) |
|
|
|
(134,708 |
) |
|
Treasury stock at cost, net of reissuances |
|
|
(57,578 |
) |
|
|
|
(43,768 |
) |
|
Accumulated other comprehensive income |
|
|
8,115 |
|
|
|
|
5,671 |
|
|
Total stockholders’ equity |
|
|
765,007 |
|
|
|
|
780,381 |
|
|
Total liabilities and stockholders’ equity |
|
$ |
976,779 |
|
|
|
$ |
997,034 |
|