Avid Announces Final Financial Results for 2009 Third Quarter

Tewksbury, Mass, 2009-11-16 Avid® (NASDAQ: AVID) today reported final financial results for the three- and nine-month periods ended September 30, 2009. These results reflect corrections of errors identified in its previously announced investigation concerning the timing of recognition of revenue. As a result of these errors, Avid has determined that it has a material weakness in the design and operating effectiveness of its controls and procedures in Europe relating to ensuring that revenue is recognized only after transfer of title and risk of loss to the customer.

Avid reported revenues of $152.1 million for the three-month period ended September 30, 2009, compared to $217.1 million for the same period in 2008. The GAAP net loss for the quarter was $17.2 million, or $0.46 per share, compared to a GAAP net loss of $66.4 million, or $1.80 per share, in the third quarter of 2008. The third quarter 2008 results included a non-cash impairment charge of $51.3 million or $1.39 per share.

The GAAP net loss for the third quarter of 2009 included amortization of intangibles, stock-based compensation, restructuring charges, loss on asset sales and related tax adjustments, collectively totaling $17.0 million. Excluding these items, the non-GAAP net loss was $215 thousand for the third quarter, or $0.01 per share.

Revenues for the nine-month period ended September 30, 2009 were $454.3 million, compared to revenues of $638.2 million for the same period in 2008. GAAP net loss for the first nine months of 2009 was $50.4 million, or $1.35 per share, compared to GAAP net loss of $97.9 million, or $2.59 per share, for the same period in 2008.

GAAP net loss for the nine-month period ended September 30, 2009 included $39.1 million of amortization, stock-based compensation, restructuring charges, loss on asset sales and related tax adjustments. Excluding these items, the non-GAAP net loss per share was $0.30 for the nine-month period ended September 30, 2009. GAAP net loss for the nine-month period ended September 30, 2008 included $82.0 million of amortization, stock-based compensation, restructuring charges, impairment charges and related tax adjustments. Excluding these items, the non-GAAP net loss per share was $0.42 for the first nine months of 2008.

The changes to the results for the third quarter and nine months ended September 30, 2009 when compared to the results reported by Avid on October 22, 2009 are that revenues were decreased by $1.6 million and gross profit was decreased by $1.1 million. Since these adjustments were related to timing of revenue recognition, and not amount, the revenue and related gross profit will be recognized in the fourth quarter of 2009. Additionally, income taxes were reduced by $0.1 million.

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 (loss) and earnings (loss) per share for the three- and nine-month periods ended September 30, 2009 and 2008 are in the tables attached to this press release.

The company uses non-GAAP financial measures internally to manage its business, for example, in establishing its annual operating budget, in assessing segment operating performance and for measuring performance under employee incentive compensation plans. Non-GAAP financial measures are used by management in its operating and financial decision-making because management believes these measures reflect the company’s ongoing business in a manner that allows meaningful period-to-period comparisons. Accordingly, the company believes it is useful for investors and others to review both GAAP and non-GAAP measures in order to (a) understand and evaluate the company’s 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 past financial results. The primary limitations associated with the company’s 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 the company’s operations. The company’s 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.

Use of Forward-Looking Statements

The above release is subject to the completion and results of the audit committee’s investigation described above and 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 the anticipated impact of the audit committee’s investigation described above, and these statements are subject to the outcome of such investigation. This release also makes forward-looking statements 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 execute on its corporate strategy and meet customer needs, general economic conditions, 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 estimates only as of today and should not be relied upon as representing the company’s estimates 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

Avid creates the digital audio and video technology used to make the most listened to, most watched and most loved media in the world – from the most prestigious and award-winning feature films, music recordings, television shows, live concert tours and news broadcasts, to music and movies made at home.  Some of Avid’s most influential and pioneering solutions include Media Composer®, Pro Tools®, Avid Unity™, Interplay®, Oxygen 8, Sibelius® and Pinnacle Studio™. For more information about Avid solutions and services, visit http://www.avid.com/, del.icio.us, Flickr, Twitter and YouTube; connect with Avid on Facebook; or subscribe to Avid Industry Buzz.

© 2009 Avid Technology, Inc. All rights reserved. Product features, specifications, systems requirements and availability are subject to change without notice.  Avid, Pinnacle Studio, Avid Unity, Interplay, Media Composer, Pro Tools, Symphony, Nitris, ISIS and Sibelius are trademarks or registered trademarks of Avid Technology, Inc. or its subsidiaries in the United States and/or other countries. The Interplay name is used with the permission of Interplay Entertainment Corp., which bears no responsibility for Avid products. All other trademarks are the property of their respective owners.

 

AVID TECHNOLOGY, INC.
Condensed Consolidated Statements of Operations
(unaudited - in thousands, except per share data)

     
Three Months Ended
  
Nine Months Ended
     
September 30,
  
September 30,
     
2009
  
2008
  
2009
  
2008
Net revenues:                
  Products  
$ 123,522
  
$ 183,686
  
$ 369,075
  
$ 540,977
  Services  
28,597
  
33,380
  
85,216
  
97,218
  Total net revenues  
152,119
  
217,066
  
454,291
  
638,195
                   
Cost of revenues:                
  Products  
57,097
  
94,303
  
176,774
  
272,004
  Services  
13,586
  
18,744
  
43,515
  
55,760
  Amortization of intangible assets  
519
  
1,249
  
1,465
  
6,773
  Restructuring costs  
-
  
-
  
799
  
-
  Total cost of revenues  
71,202
  
114,296
  
222,553
  
334,537
                   
Gross profit  
80,917
  
102,770
  
231,738
  
303,658
                   
Operating expenses:                
  Research and development  
29,262
  
37,825
  
90,974
  
115,307
  Marketing and selling  
44,705
  
53,638
  
127,480
  
159,224
  General and administrative  
12,093
  
19,734
  
39,765
  
61,169
  Amortization of intangible assets  
2,782
  
3,307
  
7,779
  
10,017
  Impairment of goodwill and intangible asset  
-
  
51,257
  
-
  
51,257
  Restructuring costs, net  
7,891
  
2,107
  
17,132
  
4,107
  Loss on sales of assets  
3,398
  
-
  
3,398
  
-
  Total operating expenses  
100,131
  
167,868
  
286,528
  
401,081
                   
Operating loss  
(19,214)
  
(65,098)
  
(54,790)
  
(97,423)
                   
Interest and other income (expense), net  
(240)
  
507
  
(29)
  
2,605
Loss before income taxes  
(19,454)
  
(64,591)
  
(54,819)
  
(94,818)
                   
(Benefit from) provision for income taxes, net  
(2,246)
  
1,800
  
(4,385)
  
3,106
                   
Net loss  
$ (17,208)
  
$ (66,391)
  
$ (50,434)
  
$ (97,924)
                   
Net loss per common share - basic and diluted  
$ (0.46)
  
$ (1.80)
  
$ (1.35)
  
$ (2.59)
                   
Weighted-average common shares outstanding - basic and diluted  
37,341
  
36,960
  
37,251
  
37,739

 

AVID TECHNOLOGY, INC.
(unaudited - in thousands, except per share data)

Change in Financial Presentation
Beginning January 1, 2009, we combined our professional video and consumer video businesses into a single reporting segment. We will now consequently report on two business segments: Audio and Video. Please note that the segment contribution margin calculation has also changed from last year. Segment contribution margin is now calculated as segment gross margin less the research and development and product management expenses directly attributable to the segment. Comparative results for the 2008 periods have been updated to reflect our new business structure.

Summary of the Company's revenues and contribution margin by reportable segment and a reconciliation of segment contribution margin to consolidated operating loss:

     
Three Months Ended
  
Nine Months Ended
     
September 30,
  
September 30,
       
2009
  
2008
  
2009
  
2008
Revenues:                
  Video (a)  
$ 92,617
  
$ 144,835
  
$ 268,818
  
$ 417,410
  Audio  
59,502
  
72,231
  
185,473
  
220,785
Total revenues  
$ 152,119
  
$ 217,066
  
$ 454,291
  
$ 638,195
                   
Contribution Margin:                
  Video  
$ 31,196
  
$ 40,791
  
$ 77,709
  
$ 112,877
  Audio  
20,883
  
23,493
  
65,444
  
76,278
Segment contribution margin  
52,079
  
64,284
  
143,153
  
189,155
                   
  Less unallocated costs and expenses:                
  Corporate research and development expenses  
(1,633)
  
(1,890)
  
(5,224)
  
(5,391)
  Marketing and selling expenses  
(41,017)
  
(48,841)
  
(116,588)
  
(146,019)
  General and administrative expenses  
(11,187)
  
(16,374)
  
(35,650)
  
(51,924)
  Amortization of acquisition-related intangible assets  
(3,301)
  
(4,556)
  
(9,244)
  
(16,790)
  Impairment of goodwill and intangible asset  
-
  
(51,257)
  
-
  
(51,257)
  Stock-based compensation  
(2,866)
  
(4,357)
  
(9,908)
  
(11,090)
  Restructuring costs, net  
(7,891)
  
(2,107)
  
(17,931)
  
(4,107)
  Loss on sales of assets  
(3,398)
  
-
  
(3,398)
  
-
Consolidated operating loss  
$ (19,214)
  
$ (65,098)
  
$ (54,790)
  
$ (97,423)
                   
(a) Includes revenues from non-core product lines of:  
$ 117
  
$ 15,121
  
$ 1,874
  
$ 50,214
                   
                   
Reconciliation of GAAP net loss to Non-GAAP net loss:
     
Three Months Ended
  
Nine Months Ended
     
September 30,
  
September 30,
     
2009
  
2008
  
2009
  
2008
GAAP net loss  
$ (17,208)
  
$ (66,391)
  
$ (50,434)
  
$ (97,924)
                   
Adjustments to reconcile to Non-GAAP net loss:                
  Amortization of intangible assets  
3,301
  
4,556
  
9,244
  
16,790
  Impairment of goodwill and intangible asset  
-
  
51,257
  
-
  
51,257
  Stock-based compensation  
2,866
  
4,357
  
9,908
  
11,090
  Restructuring costs, net  
7,891
  
2,107
  
17,931
  
4,107
  Loss on sale of assets  
3,398
  
-
  
3,398
  
-
  Related tax adjustments  
(463)
  
(240)
  
(1,357)
  
(1,288)
Non-GAAP net loss:  
$ (215)
  
$ (4,354)
  
$ (11,310)
  
$ (15,968)
                   
Weighted-average common shares outstanding - diluted  
37,341
  
36,960
  
37,251
  
37,739
                   
Non-GAAP net loss per common share - diluted  
$ (0.01)
  
$ (0.12)
  
$ (0.30)
  
$ (0.42)
                   
                   
           
     
Three Months Ended
  
Nine Months Ended
Stock-based compensation included in:  
September 30,
  
September 30,
     
2009
  
2008
  
2009
  
2008
  Cost of products revenues  
$ 163
  
$ 177
  
$ 666
  
$ 480
  Cost of services revenues  
247
  
144
  
868
  
408
  Research and development expenses  
655
  
763
  
1,737
  
2,215
  Marketing and selling expenses  
895
  
1,470
  
2,522
  
3,108
  General and administrative expenses  
906
  
1,803
  
4,115
  
4,879
     
$ 2,866
  
$ 4,357
  
$ 9,908
  
$ 11,090

 

 

AVID TECHNOLOGY, INC.
Condensed Consolidated Balance Sheets
(unaudited - in thousands)

     
September 30,
  
December 31,
       
2009
  
2008
ASSETS:        
Current assets:        
  Cash, cash equivalents and marketable securities  
$ 102,981
  
$ 147,694
  Accounts receivable, net of allowances of $15,793 and $23,182
at September 30, 2009 and December 31, 2008, respectively		  
86,544
  
103,527
  Inventories  
91,692
  
95,755
  Prepaid and other current assets  
33,378
  
43,969
  Total current assets  
314,595
  
390,945
           
Property and equipment, net  
33,556
  
38,321
Intangible assets, net  
32,451
  
38,143
Goodwill  
227,118
  
225,375
Other assets  
11,570
  
10,801
           
  Total assets  
$ 619,290
  
$ 703,585
           
LIABILITIES AND STOCKHOLDERS' EQUITY:        
Current liabilities:        
  Accounts payable  
$ 22,744
  
$ 29,419
  Accrued expenses and other current liabilities  
69,708
  
101,107
  Deferred revenues  
56,748
  
68,581
  Total current liabilities  
149,200
  
199,107
           
Long-term liabilities  
13,320
  
11,823
  Total liabilities  
162,520
  
210,930
           
Stockholders' equity:        
  Common stock  
423
  
423
  Additional paid-in capital  
989,018
  
980,563
  Accumulated deficit  
(425,337)
  
(365,431)
  Treasury stock at cost, net of reissuances  
(114,343)
  
(124,852)
  Accumulated other comprehensive income  
7,009
  
1,952
  Total stockholders' equity  
456,770
  
492,655
           
  Total liabilities and stockholders' equity  
$ 619,290
  
$ 703,585