Avid Technology Announces Revaluation of Acquisition Charges; First Quarter 1999 Revenue Expected to be Approximately 6% - 10% Above Prior Year.
The Company recorded the acquisition of Softimage in the third quarter of 1998 based on an independent, third party valuation that reflected widely recognized appraisal practices being utilized at the time of the acquisition. Since that time, however, the Securities and Exchange Commission (SEC) has expressed views on valuation methods for purchased in-process research and development (IPR&D), which differ from prior industry practice and, in certain instances, has prescribed retroactive restatement of previously reported results. Considering these recent views, the Company has voluntarily adjusted the amount originally allocated to IPR&D and will restate its third quarter 1998 consolidated financial statements accordingly. As a result, the third quarter pre-tax charge for acquired IPR&D was decreased from the $193.7 million amount previously recorded to the amount of $28.4 million. Correspondingly, the value of completed technologies recorded on the balance sheet was increased from $44.8 million to $76.2 million, and goodwill of $127.8 million was created, in addition to other minor changes. These adjustments to the purchase price allocation of Softimage have no effect upon the cash flows, financial condition or liquidity of the Company.
The Company plans to amortize the value of goodwill over three years and the values of completed technologies and other intangible assets over their estimated useful lives of two and three years, commencing as of August 1998. As a result of these changes, amortization of acquisition-related intangible assets in the third and fourth quarter of 1998 was $13.7 million and $20.5 million, respectively. Amortization of acquisition-related intangible assets during 1999 is expected to be $20.5 million per quarter and will continue at this level through the second quarter of 2000. Amortization will decline to $15.5 million in the third quarter of 2000, with a further decrease to $12.9 million for the fourth quarter 2000 through the second quarter 2001, and a final charge of $4.3 million in the third quarter 2001.
The impact of this restatement of the third quarter of 1998 is to reduce the previously recorded net loss of $144.3 million, or $5.97 per diluted share, to a net loss of $21.6 million, or $0.89 per diluted share. Excluding the one-time charge and the amortization associated with the acquisition, the Company's tax-effected net income for the third quarter remained at $8.0 million or $0.30 per diluted share, as previously announced. Excluding acquisition-related amortization, the Company's tax-effected net income for the fourth quarter remained at $15.2 million or $0.57 per diluted share, also as previously announced.
Additionally, the Company announced it anticipates revenues for the first quarter of 1999 to be approximately 6% - 10% above first quarter 1998 revenues of $108.7 million. As previously stated, the Company had expected a seasonal decline from the record fourth quarter 1998 revenues of $144.6 million. The Company plans to report results for the first quarter on April 22, 1999.
William J. Miller, Avid's Chairman and CEO, commented, "Avid's first quarter revenues continue to reflect seasonally weak sales prior to the National Association of Broadcasters (NAB) show. We are also experiencing general sluggishness in the U.S. post-production and worldwide broadcast markets. Despite these factors, we remain confident moving forward as we maintain and expand our leadership position in film, video and audio and take aim at opportunities for growth in such markets as television finishing, digital news production, corporate and industrial editing, and audio mixing."
The above includes forward-looking statements based on current expectations that involve a number of risks and uncertainties. Actual results may differ materially from those described herein, depending on the completion of the Company's financial statements for the first quarter 1999 and such factors as described under "Certain Factors That May Affect Future Results" in the Company's Annual Report on Form 10-K for 1997 and the Form 10-Q for September 30, 1998, filed with the SEC.
Avid Technology, Inc. is an international, industry-leading provider of digital audio and video tools for creating content for information and entertainment applications. The company's products are used by customers ranging from corporate communications professionals to film, television and interactive content producers to broadcast news organizations. For more information, visit Avid's World Wide Web site at www.avid.com.
Avid and Softimage are registered trademarks of Avid Technology, Inc., or its subsidiaries or divisions. All other trademarks contained herein are the property of their respective owners.
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|Date:||Mar 29, 1999|
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