Pinnacle Systems Reports Results for the Second Quarter of Fiscal
Year 2005 MOUNTAIN VIEW, Calif., Jan. 25 /PRNewswire-FirstCall/ --
Pinnacle Systems(R), Inc. (NASDAQ:PCLE) a leader in digital video
solutions, today announced financial results for its second quarter
of fiscal 2005, ended December 31, 2004. The previously-announced
sale of Steinberg Media Technologies GmbH ("Steinberg") to Yamaha
Corporation closed on January 21, 2005. The results of operations
for Steinberg are reported as discontinued operations in this press
release. Net sales from continuing operations for the second
quarter of fiscal 2005 were $86.1 million compared to net sales of
$80.3 million in the second quarter of fiscal 2004. Net sales from
discontinued operations for the second quarter of fiscal 2005 were
$6.0 million compared to net sales of $9.0 million in the second
quarter of fiscal 2004. The GAAP net loss for the second quarter of
fiscal 2005 was $6.9 million or $0.10 per share. The non-GAAP net
income for the second quarter of fiscal 2005 was $4.3 million or
$0.06 per share. This non-GAAP net income excludes $0.8 million of
amortization of other intangible assets, $9.4 million of goodwill
impairment, $3.3 million in restructuring costs, a $3.1 million
reversal of an accrued liability associated with a legal judgment
and a $0.7 million difference between GAAP and non-GAAP
discontinued operations which related to amortization of other
intangible assets. The reconciliation of the GAAP to non-GAAP
measurements for net income (loss) for the second quarter of fiscal
2005 is set forth below with Pinnacle Systems' financial
statements. The Company ended the second quarter of fiscal 2005
with a cash balance of $92.1 million from continuing operations.
"This quarter we made significant progress towards streamlining our
business by monetizing non-strategic assets, strengthening our cash
position and improving our operational efficiencies," said Patti S.
Hart, Pinnacle Systems' chairman of the board and chief executive
officer. "In addition, we were very pleased with the overall demand
for our products, especially the video editing and Digital Home
products during the traditionally strong holiday quarter,"
continued Hart. "With greater focus on our core business, we will
further leverage our resources to expand our leadership in the
markets we serve." Pinnacle Systems will host an audio web-cast at
2:00 p.m. (Pacific Time) which can be heard live at
http://www.pinnaclesys.com/. Additionally, a replay of the
conference call will be available at http://www.pinnaclesys.com/
for two weeks following the call. Thereafter, a transcript of the
conference call will be available under the "Investor Relations"
section of our website at
http://www.pinnaclesys.com/aboutus/investorrelation.asp?Langue_ID=7
. Use of Non-GAAP Financial Measures To supplement its consolidated
financial statements presented in accordance with GAAP, Pinnacle
Systems uses non-GAAP measures of pro forma net income (loss) and
pro forma net income (loss) per share, which are adjusted from its
GAAP results to exclude certain expenses. 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 expenses 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 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 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. About Pinnacle Systems, Inc.
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 press
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' expectations for
the leveraging of resources and the expansion of market leadership.
Forward-looking statements contained in this press 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. As a result, Pinnacle Systems'
actual results may differ materially and adversely from those
expressed in the forward-looking statements. Factors that may cause
such a difference include, but are not limited to, risks related to
demand for the Company's current and future products and the
ability to execute proposed initiatives. 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, including, but not limited to, its Annual
Report on Form 10-K for the fiscal year ended June 30, 2004,
including, but not limited to, under the caption "Management's
Discussion and Analysis of Financial Condition and Results of
Operations," which are on file with the Securities and Exchange
Commission (the "SEC") and available at the SEC's website at
http://www.sec.gov/. All information set forth in this release and
its attachments is made as of January 25, 2005, and Pinnacle
Systems undertakes no obligation to revise or update publicly this
information for any reason. Pinnacle Systems is a registered
trademark of Pinnacle Systems, Inc. All other trademarks and
registered trademarks are the property of their owners. (C) 2004.
Pinnacle Systems, Inc. All Rights Reserved. PINNACLE SYSTEMS, INC.
AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited,
in thousands, except per share data) GAAP NON-GAAP Three Three
Months Ended Months Ended December 31, December 31, 2004 2003 2004
2003 Net sales $86,129 $80,348 $86,129 $80,348 Costs and expenses:
Cost of sales 46,294 48,043 46,294 48,043 Cost of sales - license
fee -- 3,813 -- -- Engineering and product development 8,586 8,990
8,586 8,990 Sales, marketing, and service 20,475 22,494 20,475
22,494 General and administrative 6,583 5,213 6,583 5,213
Amortization of other intangible assets 847 1,490 -- -- Impairment
of goodwill 9,447 5,950 -- -- Restructuring costs 3,337 3,320 -- --
Legal judgment (3,137) -- -- -- Total costs and expenses 92,432
99,313 81,938 84,740 Operating income (loss) (6,303) (18,965) 4,191
(4,392) Interest paid on legal settlement -- (2,050) -- -- Interest
and other income, net 418 327 418 327 Income (loss) from continuing
operations before income taxes (5,885) (20,688) 4,609 (4,065)
Income tax expense 1,009 908 1,009 909 Income (loss) from
continuing operations (6,894) (21,596) 3,600 (4,974) Income (loss)
from discontinued operations, net of taxes 35 (8,259) 726 934 Net
income (loss) $(6,859) $(29,855) $4,326 $(4,040) Loss per share
from continuing operations: Basic and Diluted $(0.10) $(0.33)
Income (loss) per share from discontinued operations: Basic and
Diluted $0.00 $(0.12) Net income (loss) per share: Basic and
Diluted $(0.10) $(0.45) $0.06 $(0.06) Shares used to compute net
income (loss) per share: Basic and Diluted 69,517 66,401 70,031
66,401 PINNACLE SYSTEMS, INC. AND SUBSIDIARIES RECONCILIATION OF
NON-GAAP TO GAAP CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, in thousands) Three Months Ended December 31, 2004 2003
Non-GAAP net income (loss) $4,326 $(4,040) Cost of sales - license
fee -- (3,813) Amortization of other intangible assets (847)
(1,490) Impairment of goodwill (9,447) (5,950) Restructuring costs
(3,337) (3,320) Legal judgment 3,137 -- Interest paid on legal
settlement -- (2,050) Discontinued operations (691) (9,193) Income
tax effect -- 1 GAAP net loss $(6,859) $(29,855) PINNACLE SYSTEMS,
INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Unaudited, in
thousands) December 31, June 30, 2004 2004 Assets Current assets:
Cash and cash equivalents $78,444 $59,059 Marketable securities
13,631 10,955 Accounts receivable, net 39,996 40,970 Inventories
34,740 46,417 Prepaid expenses and other current assets 6,431 8,388
Current assets of discontinued operations 5,320 4,522 Total current
assets 178,562 170,311 Restricted cash -- 16,850 Property and
equipment, net 14,981 16,314 Goodwill 52,116 59,211 Other
intangible assets, net 7,193 8,840 Other assets 7,995 7,628
Long-term assets of discontinued operations 23,930 22,590 $284,777
$301,744 Liabilities and Shareholders' Equity Current liabilities:
Accounts payable $11,020 $17,912 Accrued and other liabilities
51,569 54,003 Deferred revenue 12,667 13,818 Current liabilities of
discontinued operations 3,055 3,357 Total current liabilities
78,311 89,090 Long-term liabilities of discontinued operations
1,988 1,972 Total liabilities 80,299 91,062 Shareholders' equity:
Common stock 379,303 375,550 Accumulated deficit (186,277)
(169,487) Accumulated other comprehensive income 11,452 4,619 Total
shareholders' equity 204,478 210,682 $284,777 $301,744 DATASOURCE:
Pinnacle Systems, Inc. CONTACT: Media: Amy Whelan, +1-650-237-1631
or , or Investors: Brooke Deterline, +1-650-930-3113 or , both of
Pinnacle Systems, Inc. Web site: http://www.pinnaclesys.com/
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