Pinnacle Systems (NASDAQ:PCLE)
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Pinnacle Systems Announces Financial Results for Third Quarter of
Fiscal 2005
MOUNTAIN VIEW, Calif., April 27 /PRNewswire-FirstCall/ -- Pinnacle Systems(R),
Inc. (NASDAQ:PCLE), a leader in digital video solutions, today announced its
financial results for the third fiscal quarter ended March 31, 2005.
Net sales for the third quarter of fiscal 2005 were $65.2 million, compared
with $82.1 million for the third quarter of fiscal 2004. Third-quarter 2005 net
sales were consistent with the preliminary expectations announced by the
company on April 13, 2005.
Net loss under U.S. generally accepted accounting principles (GAAP) for the
third quarter of fiscal 2005 was $615,000, or a loss of $0.01 per share. This
compared with a net loss under GAAP of $292,000, or slightly less than
break-even on a per-share basis, for the third quarter of fiscal 2004.
At March 31, 2005, Pinnacle Systems' balance sheet included cash, cash
equivalents and marketable securities totaling $133.4 million.
Pinnacle Systems' previously disclosed sales of its Steinberg Media
Technologies GmbH subsidiary to Yamaha Corporation and the assets of Team
Sports to XOS Technologies closed on January 21, 2005 and February 4, 2005,
respectively. The results for these business units are reported as
discontinued operations. On March 21, 2005, Pinnacle Systems and Avid
Technology, Inc. announced the execution of a definitive agreement for Avid to
acquire Pinnacle in a cash and stock transaction.
Pinnacle Systems' third-quarter 2005 net income under GAAP included the net
effect of $848,000 for the amortization of other intangible assets, $2.8
million for transaction costs, $175,000 for the net reversal of accrued
liabilities related to restructuring, and $6.5 million in income from
discontinued operations, net of taxes. Income from discontinued operations
reflected a $7.9-million gain on the sales of Steinberg and Team Sports and a
$1.4-million operating loss for the two business units. Excluding the net
effect of the items listed above, non-GAAP net loss for the third quarter of
fiscal 2005 was $3.7 million, or a loss of $0.05 per share.
By comparison, third-quarter 2004 net loss under GAAP included the net effect
of $869,000 for the amortization of other intangible assets, $320,000 for
restructuring costs, and $699,000 in income from discontinued operations, net
of taxes. Excluding the net effect of these items, non-GAAP net income for the
third quarter of fiscal 2004 was $198,000, or slightly more than break-even on
a per-share basis.
The reconciliation of GAAP to non-GAAP measures for net income (loss) for the
third quarters of fiscal 2005 and fiscal 2004, respectively, is set forth below
in the company's financial statements.
"During the third quarter, we continued to streamline our operations,
rationalize our product line and strengthen our balance sheet," said Patti
Hart, chairman and chief executive officer of Pinnacle Systems. "We also
launched a number of new products leading up to the 2005 National Association
of Broadcasters (NAB) conference and significantly expanded our portfolio of
solutions for the broadcast production segment. In addition, we executed a
definitive agreement for a business combination with Avid Technology, a world
leader in digital nonlinear media creation, management and distribution
solutions."
The proposed acquisition of Pinnacle Systems by Avid Technology is subject to a
number of closing conditions, including shareholder and regulatory approvals,
and is expected to close either late in the second quarter or in the third
quarter of calendar 2005.
Use of Non-GAAP Financial Measures
To supplement its consolidated financial statements presented in accordance
with GAAP, Pinnacle Systems uses non-GAAP measures of net income (loss) and net
income (loss) per share, which are adjusted from its GAAP results to exclude
certain items. These non-GAAP adjustments are provided to enhance the reader's
overall understanding of the company's current financial performance and its
prospects for the future. The company believes the non-GAAP results provide
useful information to both management and investors by excluding certain items
that it believes are not indicative of its core operating results. The
non-GAAP measures are included to provide investors and management with an
alternative method for assessing Pinnacle Systems' operating results in a
manner that is focused on the performance of Pinnacle Systems' ongoing
operations and to provide a more consistent basis for comparison between
quarters. Further, these non-GAAP results are one of the primary indicators
that management uses for planning and forecasting in future periods. In
addition, since the company has historically reported non-GAAP results to the
investment community, it believes that the inclusion of non-GAAP numbers
provides consistency in its financial reporting. The presentation of this
additional information should not be considered in isolation or as a substitute
for results prepared in accordance with accounting principles generally
accepted in the United States.
Quarterly Teleconference and Webcast
Pinnacle Systems management plans to host its regular quarterly teleconference
today at 2:00 p.m. PDT/5:00 p.m. EDT. This call will be accessible to U.S.
investors at 800-901-5247 and international investors at 617-786-4501, access
code 55468360. A live audio webcast of the teleconference will be available on
the Investor Relations page of the company's website at
http://www.pinnaclesys.com/. From this site, investors can click on the
webcast icon and listen to the teleconference, assuming that their computer
system is configured properly. For those who miss the live call, a phone
replay will be available to U.S. investors at 888-286-8010 and international
investors at 617-801-6888, access code 94402309, and a webcast replay will be
available online at http://www.pinnaclesys.com/.
About Pinnacle Systems
Pinnacle Systems provides broadcasters and consumers with cutting-edge digital
media creation, storage, and play-back solutions for use at Home, in the Studio
and on the Air. Pinnacle Systems' award-winning digital media solutions are in
use around the world for broadcast, video and audio editing, DVD and CDR
authoring and on the Internet. A recognized industry leader, the company has
received nine prestigious Emmy Awards for its technical innovations and carries
this commitment throughout all of its product lines. Pinnacle Systems may be
reached at 650-526-1600 or at http://www.pinnaclesys.com/.
Safe Harbor Statement
This news release contains forward-looking statements that involve risks and
uncertainties within the meaning of Section 27A of the Securities Act of 1933
and Section 21E of the Securities Exchange Act of 1934, including statements
regarding Pinnacle Systems' current expectations for the close of its
acquisition by Avid Technology, Inc. Forward-looking statements contained in
this news release relating to expectations about future events or results are
based upon information available to the company as of the date hereof. Readers
are cautioned that these forward-looking statements are only predictions and
are subject to risks, uncertainties and assumptions that are difficult to
predict. Factors that may cause such a difference include, but are not limited
to, risks related to the possibility that the acquisition will not close or
that the closing will be delayed due to antitrust regulatory review or other
factors. Factors that could affect Pinnacle Systems' business and financial
results are detailed in the company's periodic reports filed with the
Securities and Exchange Commission (SEC), including, but not limited to, its
Annual Report on Form 10-K for the fiscal year ended June 30, 2004; its
Quarterly Reports on Form 10-Q for the fiscal quarters ended September 30, 2004
and December 31, 2004, respectively; and the Joint Proxy Statement/Prospectus
to be filed in the future by Avid Technology and Pinnacle Systems. These
documents will be on file with the SEC and available at the SEC's website at
http://www.sec.gov/. All information set forth in this news release is made as
of April 27, 2005, and Pinnacle Systems undertakes no obligation to revise or
update publicly this information for any reason.
Additional Information
Avid plans to file with the SEC a Registration Statement on Form S-4 in
connection with the transaction, and Avid and Pinnacle plan to file with the
SEC and mail to their respective stockholders a Joint Proxy
Statement/Prospectus in connection with the transaction. The Registration
Statement and the Joint Proxy Statement/Prospectus will contain important
information about Avid, Pinnacle, the transaction, and related matters.
Investors and security holders are urged to read the Registration Statement and
the Joint Proxy Statement/Prospectus carefully when they are available.
Investors and security holders will be able to obtain free copies of the
Registration Statement and the Joint Proxy Statement/Prospectus when available
and other documents filed with the SEC by Avid and Pinnacle through the web
site maintained by the SEC at http://www.sec.gov/.
In addition, investors and security holders will be able to obtain free copies
of the Registration Statement and the Joint Proxy Statement/Prospectus when
available and other documents filed with the SEC from Avid by contacting Dean
Ridlon, Investor Relations director for Avid, at telephone number 978-640-5309,
or from Pinnacle by contacting Deborah B. Demer of Demer IR Counsel, Inc. at
telephone number 925-938-2678, extension 224.
NOTE: Avid and Pinnacle, and their respective directors and executive
officers, may be deemed to be participants in the solicitation of proxies in
respect of the transactions contemplated by the merger agreement. Information
regarding Avid's directors and executive officers is contained in Avid's Form
10-K for the year ended December 31, 2004 and its proxy statement dated April
16, 2004, which are filed with the SEC and available free of charge as
indicated above. Information regarding Pinnacle's directors and executive
officers is contained in Pinnacle's Form 10-K for the year ended June 30, 2004
and its proxy statement dated September 30, 2004, which are filed with the SEC
and available free of charge as indicated above. The interests of Avid's and
Pinnacle's respective directors and executive officers in the solicitations
with respect to the transactions in particular will be more specifically set
forth in the Registration Statement and the Joint Proxy Statement/Prospectus
filed with the SEC, which will be available free of charge as indicated above.
PINNACLE SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS - GAAP
(Unaudited, in thousands, except per-share data)
Three Nine
Months Ended Months Ended
March 31, March 31,
2005 2004 2005 2004
Net sales $65,237 $82,098 $212,568 $220,763
Costs and expenses:
Cost of sales 35,802 44,517 118,206 130,180
Engineering and
product development 7,376 9,639 24,036 27,591
Sales, marketing,
and service 18,508 21,489 55,420 61,821
General and
administrative 6,705 6,032 19,984 17,567
Amortization of
other intangible
assets 848 869 2,544 3,883
Impairment of goodwill -- -- 1,310 5,950
Legal settlement -- -- (3,137) --
Transaction costs 2,752 -- 2,752 --
In-process research
and development -- -- -- 2,193
Restructuring costs
(reversal) (175) 320 5,597 3,640
Total costs and
expenses 71,816 82,866 226,712 252,825
Operating loss (6,579) (768) (14,144) (32,062)
Interest paid on
legal settlement -- -- -- (2,050)
Interest and other
income, net 368 891 1,276 1,515
Income (loss) from
continuing operations
before income taxes (6,211) 123 (12,868) (32,597)
Income tax expense 942 1,114 2,854 2,938
Loss from
continuing
operations (7,153) (991) (15,722) (35,535)
Income (loss) from
discontinued
operations, net
of taxes 6,538 699 (1,683) (7,591)
Net loss $(615) $(292) $ (17,405) $ (43,126)
Loss per share from
continuing operations:
Basic and Diluted $(0.10) $(0.01) $(0.23) $(0.53)
Income (loss) per share
from discontinued
operations:
Basic and Diluted $ 0.09 $ 0.01 $(0.02) $(0.11)
Net loss per share:
Basic and Diluted $(0.01) $(0.00) $(0.25) $(0.65)
Shares used to compute
net loss per share:
Basic and Diluted 69,942 68,108 69,498 66,526
PINNACLE SYSTEMS, INC. AND SUBSIDIARIES
RECONCILIATION OF GAAP NET LOSS TO NON-GAAP NET INCOME (LOSS)
(Unaudited, in thousands, except per-share data)
Three Nine
Months Ended Months Ended
March 31, March 31,
2005 2004 2005 2004
GAAP net loss $(615) $(292) $(17,405) $(43,126)
Amortization of other
intangible assets 848 869 2,544 3,883
Impairment of goodwill -- -- 1,310 5,950
Legal settlement -- -- (3,137) --
Transaction costs 2,752 -- 2,752 --
In-process research
and development -- -- -- 2,193
Interest paid on
legal settlement -- -- -- 2,050
Restructuring costs
(reversal) (175) 320 5,597 3,640
Income (loss) from
discontinued
operations, net
of taxes (6,538) (699) 1,683 7,591
Non-GAAP net income
(loss) $(3,728) $198 $(6,656) $(17,819)
Non-GAAP net income
(loss) per share:
Basic $(0.05) $0.00 $(0.10) $(0.27)
Diluted $(0.05) $0.00 $(0.10) $(0.27)
Shares used to compute
non-GAAP net income
(loss) per share:
Basic 69,942 68,108 69,498 66,526
Diluted 69,942 69,895 69,498 66,526
PINNACLE SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited, in thousands)
March 31, June 30,
2005 2004
Assets
Current assets:
Cash and cash equivalents $118,922 $59,059
Marketable securities 14,507 10,955
Accounts receivable, net 30,876 37,941
Inventories 27,876 45,762
Prepaid expenses and other current assets 5,673 8,366
Current assets of discontinued operations -- 10,429
Total current assets 197,854 172,512
Restricted cash -- 16,850
Property and equipment, net 12,945 15,641
Goodwill 43,440 42,874
Other intangible assets, net 6,324 8,840
Other assets 7,433 7,283
Long-term assets of discontinued operations -- 39,945
$267,996 $303,945
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $13,877 $17,776
Accrued and other liabilities 38,072 55,748
Deferred revenue 13,736 12,497
Current liabilities of discontinued operations -- 5,164
Total current liabilities 65,685 91,185
Long-term liabilities of discontinued operations -- 2,078
Total liabilities 65,685 93,263
Shareholders' equity:
Common stock 380,835 375,550
Accumulated deficit (186,892) (169,487)
Accumulated other comprehensive income 8,368 4,619
Total shareholders' equity 202,311 210,682
$267,996 $303,945
DATASOURCE: Pinnacle Systems, Inc.
CONTACT: Mary Dotz, Chief Financial Officer of Pinnacle Systems, Inc.,
+1-650-237-1952, or
Web site: http://www.pinnaclesys.com/