Avid Reports Fourth Quarter 2007 Results


Tewksbury, Mass, 2008-01-31 TEWKSBURY, Mass.--(BUSINESS WIRE)--Jan. 31, 2008--Avid Technology, Inc. (Nasdaq: AVID) today reported revenue of $258.5 million for the three-month period ended December 31, 2007, compared to $239.0 million for the same period in 2006. GAAP net income for the quarter was $3.9 million, or $.09 per diluted share, compared to a GAAP net loss of $52.6 million, or $1.28 per share, in the fourth quarter of 2006.

GAAP net income in the fourth quarter of 2007 includes $13.3 million of amortization, stock-based compensation, restructuring costs, other costs and related tax adjustments. Excluding these items, non-GAAP earnings per diluted share were $.42. For the fourth quarter of 2006, GAAP net income included $75.1 million of impairment charges, amortization, stock-based compensation, restructuring costs and related tax adjustments. Excluding these items, non-GAAP earnings per diluted share were $.54 in the fourth quarter of 2006.

During the fourth quarter, the company's cash balance increased by $27.2 million to $224.5 million at December 31, 2007 primarily due to operating cash flow.

Though sales and cash flow were strong, we are disappointed with the lower than expected earnings performance and need to improve our profitability, said Gary Greenfield, Avid's Chairman and Chief Executive Officer. As we continue with the transformation of Avid into a more efficient and customer-focused organization, we are taking a long-term view that we believe will ultimately return the most value to our shareholders.

Revenue for the year ended December 31, 2007 was $929.6 million, compared to revenue of $910.6 million in 2006. GAAP net loss for 2007 was $8.0 million, or $.19 per share, compared to a GAAP net loss of $42.9 million, or $1.03 per share, for 2006. GAAP net loss for 2007 includes $59.1 million of amortization, stock-based compensation, restructuring costs, other costs and related tax adjustments. Excluding these items, non-GAAP earnings per share were $1.23 per diluted share for 2007. GAAP net loss for 2006 includes $113.9 million of impairment charges, amortization, stock-based compensation, restructuring costs, in-process research and development and related tax adjustments. Excluding these items, non-GAAP earnings per diluted share were $1.67 for 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 twelve-month periods ended December 31, 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 fourth quarter 2007 financial results will be held today, January 31, 2008, at 5:00 p.m. EST. The call will be open to the public and can be accessed by dialing (719) 457-2617 and referencing confirmation code 3538405. 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 Annual Report on Form 10-K. 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, 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 estimates change.

About Avid Technology, Inc.

Avid is a worldwide leader in tools for film, video, audio, 3D animation, gaming and broadcast professionals - as well as for home audio and video enthusiasts. Avid professional and consumer brands include Avid, Digidesign, M-Audio, Pinnacle Systems, Sibelius, Softimage and Sundance Digital. The vast majority of primetime television shows, feature films, commercials and chart-topping music hits are made using one or more Avid products. Whether used by seasoned professionals or beginning students, Avid's products and services enable customers to work more efficiently, productively and creatively. 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. For more information about the company's Oscar, Grammy® and Emmy® award-winning products and services, visit www.avid.com.

© 2008 Avid Technology, Inc. All rights reserved. Avid, Digidesign, Film Composer, M-Audio, Pinnacle Systems, Sibelius, Softimage, and Sundance Digital are trademarks or registered trademarks of Avid Technology, Inc. or its subsidiaries in the United States and/or other countries. Emmy is a registered trademark of ATAS/NATAS. Oscar is a trademark and service mark of the Academy of Motion Picture Arts and Sciences. Grammy is a trademark of the National Academy of Recording Arts and Sciences, Inc. All other trademarks are the property of their respective owners.

AVID TECHNOLOGY, INCCondensed Consolidated Statements of Operations(unaudited - in thousands, except per share data)                               Three Months Ended  Twelve Months Ended                                  December 31,        December 31,                               ------------------  -------------------                                 2007     2006       2007      2006                               -------- ---------  --------- ---------Net revenues:  Products                     $222,473 $213,405   $806,103  $809,002  Services                       36,047   25,644    123,467   101,576                               -------- ---------  --------- ---------     Total net revenues         258,520  239,049    929,570   910,578Cost of revenues:  Products                      111,625  104,101    390,725   388,483  Services                       19,042   15,123     68,529    56,218  Amortization of intangible   assets                         3,566    4,889     16,895    21,193  Restructuring costs             1,481        -      4,278         -                               -------- ---------  --------- ---------     Total cost of revenues     135,714  124,113    480,427   465,894                               -------- ---------  --------- ---------Gross profit                    122,806  114,936    449,143   444,684                               -------- ---------  --------- ---------Operating expenses:  Research and development       38,050   35,000    150,707   141,363  Marketing and selling          53,425   50,831    210,456   203,967  General and administrative     21,399   16,239     77,463    63,250  Amortization of intangible   assets                         3,431    3,520     13,726    14,460  Impairment of goodwill              -   53,000          -    53,000  Restructuring costs, net        1,338    3,167      9,410     2,613  In-process research and   development                        -        -          -       879                               -------- ---------  --------- ---------     Total operating expenses   117,643  161,757    461,762   479,532Operating income (loss)           5,163  (46,821)   (12,619)  (34,848)Interest and other income (expense), net                   1,739    1,591      7,637     7,274                               -------- ---------  --------- ---------Income (loss) before income taxes                            6,902  (45,230)    (4,982)  (27,574)Provision for income taxes, net                              3,049    7,335      2,997    15,353                               -------- ---------  --------- ---------Net income (loss)              $  3,853 $(52,565)  $ (7,979) $(42,927)                               ======== =========  ========= =========Net income (loss) per common share - basic                 $   0.09 $  (1.28)  $  (0.19) $  (1.03)Net income (loss) per common share - diluted               $   0.09 $  (1.28)  $  (0.19) $  (1.03)Weighted-average common shares outstanding - basic             41,008   41,016     40,974    41,736Weighted-average common shares outstanding - diluted           41,253   41,016     40,974    41,736
AVID TECHNOLOGY, INC(unaudited - in thousands, except per share data)Segment revenue and operating income (loss):                               Three Months Ended  Twelve Months Ended                                  December 31,        December 31,                               ------------------- -------------------                                 2007      2006      2007      2006                               --------- --------- --------- ---------Professional Video:  Revenues                     $133,342  $117,741  $485,186  $479,383  Operating income               10,289     5,448    24,181    38,559Audio:  Revenues                     $ 85,987  $ 83,163  $318,993  $304,362  Operating income                9,432    14,924    30,927    41,405Consumer Video:  Revenues                     $ 39,191  $ 38,145  $125,391  $126,833  Operating income (loss)          (657)      943    (5,867)   (6,063)Total:  Total segment revenues       $258,520  $239,049  $929,570  $910,578  Total segment operating   income                        19,064    21,315    49,241    73,901Reconciliation of GAAP operating income (loss) to Non-GAAP operating income:                               Three Months Ended  Twelve Months Ended                                  December 31,        December 31,                               ------------------- -------------------                                 2007      2006      2007      2006                               --------- --------- --------- ---------  Consolidated GAAP operating   income (loss)               $  5,163  $(46,821) $(12,619) $(34,848)  Adjustments to reconcile to   Non-GAAP operating income:   Amortization of intangible    assets                        6,997     8,409    30,621    35,653   Impairment of goodwill             -    53,000         -    53,000   Stock-based compensation       3,858     3,560    15,949    16,604   Restructuring costs, net       2,819     3,167    13,688     2,613   Other costs                      227         -     1,602         -   In-process research and    development                       -         -         -       879                               --------- --------- --------- --------- Total operating income for  reportable segments          $ 19,064  $ 21,315  $ 49,241  $ 73,901                               ========= ========= ========= =========Reconciliation of GAAP net income (loss) to Non-GAAP net income:  GAAP net income (loss)       $  3,853  $(52,565) $ (7,979) $(42,927)  Adjustments to reconcile to   Non-GAAP net income:    Amortization of intangible     assets                       6,997     8,409    30,621    35,653    Impairment of goodwill            -    53,000         -    53,000    Stock-based compensation      3,858     3,560    15,949    16,604    Restructuring costs, net      2,819     3,167    13,688     2,613    Other costs                     227         -     1,602         -    In-process research and     development                      -         -         -       879    Related tax adjustments        (600)    6,954    (2,740)    5,197                               --------- --------- --------- ---------  Non-GAAP net income          $ 17,154  $ 22,525  $ 51,141  $ 71,019                               ========= ========= ========= =========  Weighted-average common   shares outstanding -   diluted                       41,253    41,734    41,450    42,570  Non-GAAP net income per   common share - diluted      $   0.42  $   0.54  $   1.23  $   1.67Stock-based compensation, which relates to the adoption of SFAS 123R, the acquisition of M-Audio, and the issuance of restricted stock and restricted stock units in 2006 and 2007, is comprised of the following:                               Three Months Ended  Twelve Months EndedStock-based compensation          December 31,        December 31, included in:                               ------------------- -------------------                                 2007      2006      2007      2006                               --------- --------- --------- ---------  Cost of products revenues    $    174  $    118  $    679  $    516  Cost of services revenues         133       178       829       801  Research and development   expenses                       1,106     1,028     4,521     4,830  Marketing and selling   expenses                       1,242     1,053     4,470     4,691  General and administrative   expenses                       1,203     1,183     5,450     5,766                               --------- --------- --------- ---------                               $  3,858  $  3,560  $ 15,949  $ 16,604                               ========= ========= ========= =========
AVID TECHNOLOGY, INCCondensed Consolidated Balance Sheets(unaudited - in thousands)                                             December 31, December 31,                                                 2007          2006                                             ------------ ------------ASSETS:Current assets: Cash, cash equivalents and marketable  securities                                  $  224,460    $ 172,107 Accounts receivable, net of allowances of  $20,784 and $23,087 at December 31, 2007  and 2006, respectively                         138,692      138,578 Inventories                                     117,324      144,238 Prepaid and other current assets                 36,788       29,016                                             ------------ ------------   Total current assets                          517,264      483,939 Property and equipment, net                      46,160       40,483 Intangible assets, net                           71,427      102,048 Goodwill                                        360,584      360,143 Other assets                                     10,518       10,421                                             ------------ ------------   Total assets                               $1,005,953    $ 997,034                                             ============ ============LIABILITIES AND STOCKHOLDERS' EQUITY:Current liabilities: Accounts payable                             $   34,992    $  34,108 Accrued expenses and other current  liabilities                                     93,912       88,331 Deferred revenues                                79,771       73,743                                             ------------ ------------   Total current liabilities                     208,675      196,182 Long-term liabilities                            17,495       20,471                                             ------------ ------------   Total liabilities                             226,170      216,653                                             ------------ ------------Stockholders' equity:  Common stock                                       423          423  Additional paid-in capital                     968,339      952,763  Accumulated deficit                           (155,722)    (134,708)  Treasury stock at cost, net of reissuances     (45,823)     (43,768)  Accumulated other comprehensive income          12,566        5,671                                             ------------ ------------  Total stockholders' equity                     779,783      780,381                                             ------------ ------------    Total liabilities and stockholders'     equity                                   $1,005,953    $ 997,034                                             ============ ============