-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, RiIPMk9QPbrMYJdovJQkxkN7DPQgoG1aQjxjz2y+juk2FZQEnP8DbSiq24cAH95+ zgbNkPSYqA7XKLkuyp6FIQ== 0001157523-06-011063.txt : 20061108 0001157523-06-011063.hdr.sgml : 20061108 20061108165150 ACCESSION NUMBER: 0001157523-06-011063 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20061108 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20061108 DATE AS OF CHANGE: 20061108 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SONIC SOLUTIONS/CA/ CENTRAL INDEX KEY: 0000916235 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER INTEGRATED SYSTEMS DESIGN [7373] IRS NUMBER: 930925818 STATE OF INCORPORATION: CA FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-23190 FILM NUMBER: 061198125 BUSINESS ADDRESS: STREET 1: 101 ROWLAND WAY STREET 2: STE 110 CITY: NOVATO STATE: CA ZIP: 94945 BUSINESS PHONE: 4158938000 MAIL ADDRESS: STREET 1: 101 ROWLAND WAY STREET 2: STE 110 CITY: NOVATO STATE: CA ZIP: 94945 8-K 1 a5270079.txt SONIC SOLUTIONS 8-K UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 Form 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): November 8, 2006 SONIC SOLUTIONS (Exact name of registrant as specified in its charter) California 23190 93-0925818 (State or other jurisdiction of (Commission File Number) (I.R.S. Employer organization) Identification No.) 101 Rowland Way, Suite 110 Novato, CA 94945 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (415) 893-8000 Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below): [ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) [ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) [ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) [ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) ITEM 2.02. RESULTS OF OPERATIONS AND FINANCIAL CONDITION On November 8, 2006, Sonic Solutions (the "Company") issued a press release announcing the results of its second quarter ended September 30, 2006. A copy of the press release, dated November 8, 2006, is attached hereto as Exhibit 99.1. The information in this Item 2.02 of Form 8-K and Exhibit 99.1 attached hereto are being furnished and shall not be deemed "filed" for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that Section. The information in this Item 2.02 of Form 8-K and Exhibit 99.1 shall not be incorporated by reference into any registration statement or other document filed pursuant to the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such a filing. ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS. d. Exhibits The following exhibit is furnished with this Current Report on Form 8-K: Exhibit Description --------- ----------------------------------------------------------------- 99.1 Press Release of Sonic Solutions dated November 8, 2006 2 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. SONIC SOLUTIONS By: /s/ David C. Habiger -------------------- Name: David C. Habiger Title: President and Chief Executive Officer (Principal Executive Officer) Date: November 8, 2006 3 EX-99.1 2 a5270079-ex991.txt EXHIBIT 99.1 Exhibit 99.1 Sonic Solutions Reports Results for Second Quarter Ended September 30, 2006 NOVATO, Calif.--(BUSINESS WIRE)--Nov. 8, 2006--Sonic Solutions(R) (NASDAQ: SNIC) today announced its financial results for the second quarter ended September 30, 2006. Summary Financial Results (in thousands, except per share amounts) Three Months Ended September 30, 2006 (Non-GAAP) 2006 (GAAP) 2005 (Non-GAAP) 2005 (GAAP) ----------------- ----------- --------------- ------------ (unaudited) (unaudited) (unaudited) (unaudited) ----------------- ----------- --------------- ------------ Net revenue $35,853 $35,853 $31,948 $31,948 Gross profit $28,938 $27,762 $26,112 $24,794 Net income $4,194 $2,669 $2,599 $3,102 Net income per diluted share $0.15 $0.10 $0.09 $0.11 For the quarter ended September 30, 2006, net revenue was $35.9 million, reflecting an increase of 12% from $31.9 million for the quarter ended September 30, 2005. Gross profit was $27.8 million compared to $24.8 million for the quarter ended September 30, 2005, representing an increase of 12%. Net income was $2.7 million or $0.10 per fully diluted share in the quarter ended September 30, 2006. The non-GAAP presentation contained herein excludes stock based compensation charges resulting from our adoption of Statement of Financial Accounting Standard 123R ("SFAS 123R") "Share-Based Payments," certain abandoned acquisition costs, and the amortization of acquired intangibles. Based on these adjustments, non-GAAP net income for the second quarter ended September 30, 2006 was $4.2 million and non-GAAP net income per diluted share was $0.15 "Our fiscal second quarter fell slightly below expectations due to an interruption with a key OEM partner. However, we have worked to alleviate this disruption and further enhance our relationship. We also made significant progress on our key corporate initiatives, including HD, DVD On Demand, and the launch of Easy Media Creator 9," stated Dave Habiger, President and Chief Executive Officer of Sonic. "This morning we announced the acquisition of SystemOK, a provider of system restore software. We expect this strategic move will advance our leadership position in creating, managing and editing digital media software by ensuring the safety of consumers' digital media assets and providing significant value to key OEM partners." Non-GAAP Presentation In this press release, Sonic provides adjustments to financial information calculated on the basis of GAAP as supplemental information relating to its results of operations. The non-GAAP financial measures are used in addition to and in conjunction with results presented in accordance with GAAP, and are intended to provide additional insight into our operations that, when viewed with our GAAP results and the accompanying reconciliations to the corresponding GAAP financial measures, offers a more complete understanding of factors and trends affecting our business. The non-GAAP measures should be considered as supplements to, and not as substitutes for or superior to, the corresponding measures calculated in accordance with GAAP. The non-GAAP disclosure and the non-GAAP adjustments, including the basis for such adjustment and the impact on our operations, are outlined below: Stock Compensation Expense Adjustment. As of April 1, 2006, we adopted SFAS 123R. In our non-GAAP presentation for the second quarter ended September 30, 2006, we excluded $344,000, or $0.01 per fully diluted share tax affected, in stock compensation expense recorded in our GAAP income statement pursuant to SFAS 123R. SFAS 123R stock compensation expense was recorded in our GAAP income statement as follows: $7,000 to cost of revenue; $125,000 to marketing and sales; $125,000 to research and development; and $87,000 to general and administrative. Given the significance and non-cash nature of this expense, and for the reasons set forth below, management has excluded such expense from the non-GAAP earnings presentation for the second quarter ended September 30, 2006. Further, we believe the exclusion of stock compensation expenses recorded in the second quarter ended September 30, 2006 improves the comparability to our results for the second quarter ended September 30, 2005 during which there was no stock option expense recorded, as the adoption of SFAS 123R occurred during the current fiscal year. Abandoned Acquisition Expense Adjustment. During the second quarter ended September 30, 2006, we expensed costs incurred during the due diligence phase of a potential acquisition of a company that we evaluated, but ultimately did not acquire. We excluded this amount from our non-GAAP financial measures because we believe it is a non-recurring expense that is not indicative of Sonic's ongoing business operations. Further, we believe this exclusion improves the comparability to our results for the second quarter ended September 30, 2005, since there was no comparable expense during that quarter. Acquisition-Related Intangible Amortization. Under purchase accounting rules, some portion of an acquisition purchase price is allocated to intangibles, such as core and developed technology and customer contracts, which are then amortized over various periods of time. The GAAP presentation includes amortization on all acquired intangibles from prior transactions we have consummated. The amortization expense on acquired intangibles does not result in ongoing cash expenditures and, in management's view, does not otherwise have a material impact on Sonic's ongoing business operations. We believe our non-GAAP presentation is useful to investors for the reasons described above, and because such presentation offers investors a better understanding of Sonic's core business operating results and budget planning decisions. Management uses these non-GAAP measures internally to plan and forecast future periods, to establish operational goals, to compare with its business plan and individual operating budgets and to allocate resources. The economic substance behind our decision to use the non-GAAP measures is an increase in net income of $0.05 per fully diluted share for the quarter ended September 30, 2006. Material limitations associated with the use of the non-GAAP financial measures versus the comparable GAAP measures are (a) the non-GAAP measures provide a view of our earnings that does not include all of our expense obligations for the period in question, and (b) this may not enhance the comparability of our results to those of other companies undergoing similar transitions as a result of the adoption of SFAS 123R or to companies who have abandoned acquisition expenses and/or acquisition-related intangibles, but who have treated such matters differently. We compensate for these limitations by providing full disclosure of the effects of these non-GAAP measures, by presenting the corresponding treatment prepared in conformity with GAAP in this release and in our financial statements and by providing a reconciliation to the corresponding GAAP measures so that investors can use the information to perform their own analysis. Sonic will conduct a conference call at 1:30 p.m. PST, or 4:30 p.m. EST, today to discuss its financial results for the second quarter ended September 30, 2006. Investors are invited to listen to Sonic's quarterly conference call on the investor section of the Company's website at www.sonic.com (http://www.sonic.com/). A replay of the web cast will be available approximately two hours after the conclusion of the call. An audio replay of the conference call will also be made available approximately two hours after the conclusion of the call. The audio replay will remain available until 9:00 p.m. PST, November 15, 2006, and can be accessed by dialing 719-457-0820 or 888-203-1112 and entering confirmation code 6216407. Sonic Solutions Condensed Consolidated Statements of Operations (in thousands, except per share amounts, unaudited) Three Months Ended Six Months Ended September 30, September, 30, 2006 2005 2006 2005 --------- -------- -------- -------- Net Revenue $35,853 $31,948 $72,740 $67,467 Cost of Revenue 8,091 7,154 15,806 16,919 --------- -------- -------- -------- Gross Profit 27,762 24,794 56,934 50,548 --------- -------- -------- -------- Operating expenses Marketing and sales 7,698 7,354 15,227 15,877 Research and development 10,283 10,819 21,015 20,692 General and administrative 4,531 3,354 8,797 8,264 Abandoned acquisition 1,016 --- 1,016 --- Business integration --- 41 --- 336 --------- -------- -------- -------- Total operating expenses 23,528 21,568 46,055 45,169 --------- -------- -------- -------- Operating income 4,234 3,226 10,879 5,379 Other income (expense), net 190 (234) 348 (347) --------- -------- -------- -------- Income before income taxes 4,424 2,992 11,227 5,032 Provision (benefit) for income taxes 1,755 (110) 4,468 (3,974) --------- -------- -------- -------- Net income $2,669 $3,102 6,759 9,006 ========= ======== ======== ======== Net income per share Basic $0.10 $0.13 $0.26 $0.37 ========= ======== ======== ======== Diluted $0.10 $0.11 $0.25 $0.32 ========= ======== ======== ======== Shares used in computing net income per share Basic 25,922 24,586 25,850 24,468 ========= ======== ======== ======== Diluted 27,253 27,975 27,334 27,738 ========= ======== ======== ======== Sonic Solutions Condensed Consolidated Balance Sheets (in thousands, except share amounts) September 30, March 31, 2006 2006(1) (unaudited) ------------- ----------- ASSETS - --------------------------------------------- Current assets: Cash and cash equivalents $ 16,344 $ 18,731 Short term investments 44,275 42,350 Accounts receivable, net of allowance for returns and doubtful accounts of $5,235 and $7,611 at March 31, 2006 and September 30, 2006, respectively 22,563 23,141 Inventory 458 689 Deferred tax benefit 4,037 3,879 Prepaid expenses and other current assets 3,454 3,771 ------------- ----------- Total current assets 91,131 92,561 Fixed assets, net 3,775 4,833 Purchased and internally developed software costs, net 885 1,266 Goodwill 54,151 54,151 Acquired intangibles, net 41,576 43,914 Deferred tax benefit, net 8,921 11,391 Other assets 946 1,355 ------------- ----------- Total assets $ 201,385 $ 209,471 ============= =========== LIABILITIES AND SHAREHOLDERS' EQUITY - --------------------------------------------- Current liabilities: Accounts payable $ 4,903 $ 7,727 Accrued liabilities 21,144 24,380 Deferred revenue 5,206 7,795 Bank note payable 20,000 --- Obligations under capital leases, current portion 8 35 ------------- ----------- Total current liabilities 51,261 39,937 Bank note payable --- 30,000 Other long term liabilities, net of current portion 585 373 Deferred revenue, net of current portion 59 2 Obligations under capital leases, net of current portion --- 2 ------------- ----------- Total liabilities 51,905 70,314 ------------- ----------- Shareholders' equity: Convertible preferred stock, no par value, 10,000,000 shares authorized; 0 shares issued and outstanding at March 31, 2006, and September 30, 2006, respectively --- --- Common stock, no par value, 100,000,000 shares authorized; 25,685,953 and 25,973,792 shares issued and outstanding at March 31, 2006 and September 30, 2006, respectively 130,571 126,880 Accumulated other comprehensive loss (1,064) (937) Accumulated earnings 19,973 13,214 ------------- ----------- Total shareholders' equity 149,480 139,157 ------------- ----------- Total liabilities and shareholders' equity $ 201,385 $ 209,471 ============= =========== (1) March 31, 2006 balances are derived from the audited financial statements included in the Company's 2006 Annual Report on Form 10-K. Sonic Solutions Reconciliation of Reported Operating Results to Non-GAAP Operating Results (in thousands, except per share amounts) Three Months Ended September 30, 2006 2005 ----------- ----------- (unaudited) (unaudited) Reconciliation from GAAP to Non-GAAP Gross Profit - ----------------------------------------------- GAAP gross profit $ 27,762 $ 24,794 Non-GAAP adjustment: Amortization of acquired intangibles 1,169 1,318 SFAS 123R stock compensation expense included in cost of revenue 7 --- ----------- ----------- Non-GAAP gross profit $ 28,938 $ 26,112 =========== =========== Reconciliation from GAAP to Non-GAAP Net Income - ----------------------------------------------- GAAP net income $ 2,669 $ 3,102 GAAP income before tax 4,424 2,992 Non-GAAP adjustment: SFAS 123R stock compensation expense 344 --- Abandoned acquisition expense 1,016 --- Amortization of acquired intangibles 1,169 1,318 Tax adjustment(1) (1,004) (1,821) ----------- ----------- Non-GAAP net income $ 4,194 $ 2,599 =========== =========== GAAP net income per share applicable to common Basic $ 0.10 $ 0.13 =========== =========== Diluted $ 0.10 $ 0.11 =========== =========== Non-GAAP net income per share applicable to common Basic $ 0.16 $ 0.11 =========== =========== Diluted $ 0.15 $ 0.09 =========== =========== Shares used in computing per share amounts Basic 25,922 24,586 =========== =========== Diluted 27,253 27,975 =========== =========== (1) Tax adjustment calculated by applying second quarter ended September 30, 2006 effective tax rate of 39.7%. About Sonic Solutions Sonic Solutions (NASDAQ:SNIC) (http://www.sonic.com) is the leader in digital media software, providing a broad range of interoperable, platform-independent software tools and applications for creative professionals, business and home users, and technology partners. Sonic's products range from advanced DVD authoring systems and interactive content delivery technologies used to produce the majority of Hollywood DVD film releases, to the award-winning Roxio(R)-branded CD and DVD creation, playback and backup solutions that have become the premier choice for consumers, prosumers and business users worldwide. Sonic products are globally available from major retailers as well as online at Sonic.com and Roxio.com, and are bundled with PCs, after-market drives and consumer electronic devices. Sonic's digital media creation engine is the de facto standard and has been licensed by major software and hardware manufacturers, including Adobe, Microsoft, Scientific-Atlanta, Sony, and many others. Sonic Solutions is headquartered in Marin County, California. Sonic, the Sonic logo, Sonic Solutions, and Roxio are trademarks or registered trademarks of Sonic Solutions in the U.S. and/or other countries. All other company or product names are trademarks or registered trademarks of their respective owners and, in some cases, are used by Sonic under license. Forward-Looking Statements This press release and Sonic's quarter ended September 30, 2006 earnings conference call contain forward-looking statements that are based upon current expectations. Such forward-looking statements include revenue and earnings per share guidance for the quarter ending December 31, 2006 and revenue guidance for the fiscal year ending March 31, 2008; and views regarding opportunities presented by the "download and burn" business model, our ability to strengthen our relationships with end-users, the opportunities and benefits achieved through Sonic's integration of the Roxio Consumer Software Division, the evolution of, and opportunities for Sonic arising from, next-generation high definition formats and channels, future market opportunities and the potential benefits of our acquisition of SystemOK. These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results to differ materially from any future results, performance or achievements expressed or implied by such forward-looking statements. Important factors that could cause such differences include, but are not limited to, the timely introduction and acceptance of new products, including but not limited to Sonic's high definition series products; the costs associated with new product introductions and the possible adverse effect on gross margin; any fluctuation in demand for Sonic products; the transition of products to new hardware configurations and platforms; unforeseen increases in operating expenses, new product introductions, cost of Sarbanes Oxley ("SOX") compliance or business expansion; loss of significant customers or key suppliers; risks related to acquisitions and international operations; costs associated with litigation or prosecution and intellectual property claims; changes in effective tax rates; and other factors, including those discussed in Sonic's annual and quarterly reports on file with the Securities and Exchange Commission. This press release should be read in conjunction with Sonic's most recent annual report on Form 10-K and Form 10-K/A and Sonic's other reports on file with the Securities and Exchange Commission, which contain a more detailed discussion of Sonic's business including risks and uncertainties that may affect future results. Sonic does not undertake to update any forward-looking statements. CONTACT: Sonic Solutions A. Clay Leighton, Chief Financial Officer, 415-893-8000 Fax: 415-893-8008 clay_leighton@sonic.com or StreetSmart Investor Relations Brooke Deterline, 415-893-7824 Anne Leschin, 415-775-1788 investinsonic@sonic.com -----END PRIVACY-ENHANCED MESSAGE-----