Avid Announces Results for Fourth Quarter 2011

Reports First Quarterly GAAP Net Income Since 2007

Avid® ( AVID ) today reported revenues of $185.3 million for the three-month period ended December 31, 2011, compared to $195.3 million for the same period in 2010. The GAAP net income for the fourth quarter was $1.2 million or $0.03 per share, compared to a GAAP net loss of $571,000 or $0.01 per share, in the fourth quarter of 2010.

The GAAP net income for the fourth quarter of 2011 and GAAP net loss for 2010 included amortization of intangible assets, stock-based compensation, gain on asset sales in 2010 only, restructuring and other charges, and related tax adjustments collectively totaling $13.4 million and $14.8 million, respectively. Excluding these items, the non-GAAP net income for the fourth quarter of 2011 was $14.6 million, or $0.38 per share, compared to non-GAAP net income of $14.2 million, or $0.37 per share, for the fourth quarter of 2010.

“Our results for the fourth quarter were encouraging and reflect our continued efforts to streamline our operations and improve execution across the business,” said Gary Greenfield, chairman and CEO of Avid. “For the quarter, we reported positive GAAP net income for the first time since 2007, positive cash flow from operations and the highest gross margin as a percent of revenue since 2005. In addition, we have implemented the restructuring we announced in October and expect to see additional benefit from these actions in 2012. We continue to identify and implement changes across the Company to help improve our operational performance and remain sharply focused on improving profitability while driving revenue growth.”

Revenues for the twelve-month period ended December 31, 2011 were $677.9 million, compared to revenues of $678.5 million for the same period in 2010. The GAAP net loss for 2011 was $23.8 million, or $0.62 per share, compared to a GAAP net loss of $37.0 million, or $0.98 per share, for 2010. The GAAP net loss for 2011 and 2010 included $34.0 million and $46.2 million, respectively, of amortization of intangible assets, stock-based compensation, restructuring and other charges, gain or loss on sales of assets, legal settlements, acquisition-related costs and related tax adjustments. Excluding these items, the non-GAAP net income for 2011 was $10.2 million, or $0.26 per share, compared to a non-GAAP net income of $9.2 million, or $0.24 per share, for 2010.

A reconciliation of GAAP to non-GAAP results is included in the tables attached to this release.

Conference Call

A conference call to discuss Avid’s fourth quarter 2011 financial results will be held today, February 7, 2012 at 4:30 p.m. ET. The call will be open to the public and can be accessed by dialing 719.457.2617 and referencing confirmation code 4569475. The call and subsequent replay will also be available on Avid’s website. To listen via this alternative, go to the Investors tab at www.avid.com for complete details prior to the start of the conference call.

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. Non-GAAP financial measures are not based on a comprehensive set of accounting rules or principles. 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. Non-GAAP financial measures should be considered in addition to, not as a substitute for or superior to, financial measures determined in accordance with GAAP. The reconciliation of the GAAP to non-GAAP financial measures is in the tables attached to this press release.

Management considers both GAAP and non-GAAP financial results in managing our business. Non-GAAP financial measures are used internally, for example, in establishing annual operating budgets, in assessing operating performance and for measuring performance under incentive compensation plans. Non-GAAP financial measures are also used in operating and financial decision-making because we believe these measures reflect our ongoing business and allow meaningful period-to-period comparisons. We believe it is useful for investors and others to also review both GAAP and non-GAAP measures in order to understand and evaluate our current operating performance and future prospects in the same manner as management and to compare in a consistent manner the company’s current financial results with past financial performance. The primary limitations associated with our use of non-GAAP financial measures are that they may not include all items of income and expense that affect our operations and that the non-GAAP financial measures we use may not be directly comparable to those reported by other companies. For example, terms referring to non-GAAP financial measures used in this press release, such as non-GAAP net income, do not have standardized meanings. Other companies may use the same or similarly named measures, but exclude different items, which may not provide investors with a comparable view of our performance in relation to other companies. We seek to compensate for this limitation by providing a detailed reconciliation of the non-GAAP financial measures to the most directly comparable GAAP measures in the tables attached to this press release.

Use of Forward-Looking Statements

The financial results included in this release are unaudited. The contents of this release are subject to the completion and filing of our Annual Report on Form 10-K which will reflect our audited results. This release may include forward-looking statements, as defined by the Private Securities Litigation Reform Act of 1995. Statements in this press release that relate to future results or events are forward-looking statements and are based on Avid’s current estimates and assumptions. Forward-looking statements may be identified by the use of forward-looking words, such as “anticipate,” “believe,” “should,” “estimate,” “expect,” “intend,” “confidence,” “may,” “plan,” “feel,” “could,” “will,” and “would,” or similar expressions. Actual results and events in future periods may differ materially from those expressed or implied by these forward-looking statements because of a number of risks, uncertainties and other factors, including: such as Avid’s ability to execute its strategic plan and meet customer needs; its ability to produce innovative products in response to changing market demand, particularly in the media industry; competitive factors; fluctuations in its revenue, based on, among other things, Avid’s performance in particular geographies, fluctuations in foreign currency exchange rates, and seasonal factors, such as higher consumer demand at year-end; adverse changes in economic conditions; Avid’s liquidity; and other risk factors and uncertainties 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, Interplay®, ISIS®, VENUE, Sibelius®, System 5, and Avid® Studio. For more information about Avid solutions and services, visit www.avid.com, Flickr, Twitter and YouTube; connect with Avid on Facebook; or subscribe to Avid Industry Buzz.

© 2012 Avid Technology, Inc. All rights reserved. Product features, specifications, system requirements and availability are subject to change without notice. All prices are MSRP for the U.S. and Canada only and are subject to change without notice. Contact your local Avid office or reseller for prices outside the U.S. and Canada. Avid, the Avid logo, Fast Track, M-Audio, Media Composer, Pro Tools, Interplay, ISIS, Sibelius, and Avid Studio 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 the 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						Twelve Months Ended
	December 31,						December 31,
	2011			2010			2011			2010
Net revenues:
Products	$	147,971		$	162,863		$	546,371		$	559,907
Services		37,333			32,484			131,565			118,615
Total net revenues		185,304			195,347			677,936			678,522

Cost of revenues:
Products		66,221			74,458			255,735			267,985
Services		18,137			15,117			62,482			56,490
Amortization of intangible assets		657			642			2,693			3,299
Total cost of revenues		85,015			90,217			320,910			327,774

Gross profit		100,289			105,130			357,026			350,748

Operating expenses:
Research and development		28,722			30,881			118,108			120,229
Marketing and selling		47,592			47,759			183,865			177,178
General and administrative		14,393			16,166			57,851			64,345
Amortization of intangible assets		2,063			2,186			8,528			9,743
Restructuring and other costs, net		8,530			14,918			8,858			20,450
(Gain) loss on sales of assets		-			(3,502	)		597			(5,029	)
Total operating expenses		101,300			108,408			377,807			386,916

Operating loss		(1,011	)		(3,278	)		(20,781	)		(36,168	)

Interest and other income (expense), net		(497	)		(258	)		(2,068	)		(390	)
Loss before income taxes		(1,508	)		(3,536	)		(22,849	)		(36,558	)

(Benefit from) provision for income taxes, net		(2,715	)		(2,965	)		942			396

Net income (loss)	$	1,207			($571	)		($23,791	)		($36,954	)

Net income (loss) per common share - basic	$	0.03			($0.01	)		($0.62	)		($0.98	)

Net income (loss) per common share - diluted	$	0.03			($0.01	)		($0.62	)		($0.98	)

Weighted-average common shares outstanding - basic		38,580			38,101			38,435			37,895

Weighted-average common shares outstanding - diluted		38,584			38,101			38,435			37,895

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

Reconciliations of GAAP financial measures to Non-GAAP financial measures:

Three Months Ended December 31, 2011

	Gross		Operating			Operating			Tax		Net
	Profit		Expenses			(Loss) Income			Benefit		Income
GAAP	$	100,289	$	101,300			($1,011	)	($2,715	)	$	1,207

Amortization of intangible assets		657		(2,063	)		2,720					2,720
Restructuring costs, net				(8,530	)		8,530					8,530
Tax adjustment									750			(750	)
Stock-based compensation included in:
Cost of products revenues		2					2					2
Cost of services revenues		156					156					156
Research and development expenses				(300	)		300					300
Marketing and selling expenses				(1,105	)		1,105					1,105
General and administrative expenses				(1,289	)		1,289					1,289
Non-GAAP	$	101,104	$	88,013		$	13,091		($1,965	)	$	14,559

Weighted-average shares outstanding - diluted												38,584

Non-GAAP net income per share - diluted											$	0.38

Three Months Ended December 31, 2010

	Gross		Operating			Operating			Tax		Net
	Profit		Expenses			(Loss) Income			Benefit		(Loss) Income
GAAP	$	105,130	$	108,408			($3,278	)	($2,965	)		($571	)

Amortization of intangible assets		642		(2,186	)		2,828					2,828
Restructuring and other costs, net				(14,918	)		14,918					14,918
Gain on sales of assets				3,502			(3,502	)				(3,502	)
Tax adjustment									2,752			(2,752	)
Stock-based compensation included in:
Cost of products revenues		162					162					162
Cost of services revenues		232					232					232
Research and development expenses				(523	)		523					523
Marketing and selling expenses				(956	)		956					956
General and administrative expenses				(1,434	)		1,434					1,434
Non-GAAP	$	106,166	$	91,893		$	14,273		($213	)	$	14,228

Weighted-average shares outstanding - diluted												38,182

Non-GAAP net income per share - diluted											$	0.37

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

Reconciliations of GAAP financial measures to Non-GAAP financial measures:

Twelve Months Ended December 31, 2011

	Gross		Operating			Operating			Tax		Net
	Profit		Expenses			(Loss) Income			Provision		(Loss) Income
GAAP	$	357,026	$	377,807			($20,781	)	$	942		($23,791	)

Amortization of intangible assets		2,693		(8,528	)		11,221					11,221
Restructuring costs, net				(8,858	)		8,858					8,858
Legal settlements and acquisition-related costs (a)				(555	)		555					555
Loss on sales of assets				(597	)		597					597
Tax adjustment										1,865		(1,865	)
Stock-based compensation included in:
Cost of products revenues		419					419					419
Cost of services revenues		764					764					764
Research and development expenses				(1,634	)		1,634					1,634
Marketing and selling expenses				(4,730	)		4,730					4,730
General and administrative expenses				(7,072	)		7,072					7,072
Non-GAAP	$	360,902	$	345,833		$	15,069		$	2,807	$	10,194

Weighted-average shares outstanding - diluted												38,534

Non-GAAP net income per share - diluted											$	0.26

Twelve Months Ended December 31, 2010

	Gross		Operating			Operating			Tax		Net
	Profit		Expenses			(Loss) Income			Provision		(Loss) Income
GAAP	$	350,748	$	386,916			($36,168	)	$	396		($36,954	)

Amortization of intangible assets		3,299		(9,743	)		13,042					13,042
Restructuring and other costs, net (b)				(20,450	)		20,450					20,450
Legal settlement and acquisition-related costs (a)				(6,425	)		6,425					6,425
Gain on sales of assets				4,029			(4,029	)				(4,029	)
Tax adjustment										3,606		(3,606	)
Stock-based compensation included in:
Cost of products revenues		724					724					724
Cost of services revenues		1,054					1,054					1,054
Research and development expenses				(2,227	)		2,227					2,227
Marketing and selling expenses				(4,109	)		4,109					4,109
General and administrative expenses				(5,807	)		5,807					5,807
Non-GAAP	$	355,825	$	342,184		$	13,641		$	4,002	$	9,249

Weighted-average shares outstanding - diluted												37,963

Non-GAAP net income per share - diluted											$	0.24

(a) Represents costs included in general and administrative expenses
(b) Includes costs of $3.7 million related to exiting our former Tewksbury, Massachusetts headquarters lease

Revenue Summary:
	Three Months Ended					Twelve Months Ended
	December 31,					December 31,
	2011		2010			2011			2010
Video revenues	$	116,229	$	117,793		$	405,471		$	395,853
Audio revenues		69,075	$	77,554			272,465			282,669
Total net revenues	$	185,304	$	195,347		$	677,936		$	678,522

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

	December 31,			December 31,
	2011			2010
ASSETS:
Current assets:
Cash and cash equivalents	$	32,855		$	42,782
Accounts receivable, net of allowances of $15,985 and $17,149 at December 31, 2011 and 2010, respectively
		104,305			101,171
Inventories		111,833			108,357
Deferred tax assets, net		1,480			1,068
Prepaid expenses		7,652			7,688
Other current assets		14,509			15,701
Total current assets		272,634			276,767

Property and equipment, net		53,487			62,519
Intangible assets, net		18,524			29,750
Goodwill		246,398			246,997
Other assets		11,568			10,538

Total assets	$	602,611		$	626,571

LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Accounts payable	$	42,533		$	47,340
Accrued compensation and benefits		31,350			38,686
Accrued expenses and other current liabilities		34,174			40,986
Income taxes payable		3,898			4,640
Deferred revenues		45,768			43,634
Total current liabilities		157,723			175,286

Long-term liabilities		27,885			24,675
Total liabilities		185,608			199,961

Stockholders' equity:
Common stock		423			423
Additional paid-in capital		1,018,604			1,005,198
Accumulated deficit		(524,530	)		(495,254	)
Treasury stock at cost, net of reissuances		(82,301	)		(91,025	)
Accumulated other comprehensive income		4,807			7,268
Total stockholders' equity		417,003			426,610

Total liabilities and stockholders' equity	$	602,611		$	626,571

AVID TECHNOLOGY, INC.
Condensed Consolidated Statements of Cash Flows
(unaudited - in thousands)

	Three Months Ended						Twelve Months Ended
	December 31,						December 31,
	2011			2010			2011			2010
Cash flows from operating activities:
Net income (loss)	$	1,207			($571	)		($23,791	)		($36,954	)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation and amortization		8,445			8,454			31,983			33,480
Provision for doubtful accounts		1,028			(91	)		1,562			194
Non-cash provision for restructuring		68			126			326			417
(Gain) loss on sales of assets		-			(3,502	)		597			(5,029	)
Gain on disposal of fixed assets		(14	)		(8	)		(24	)		(78	)
Compensation expense from stock grants and options		2,852			3,307			14,619			13,921
Non-cash interest expense		73			52			301			52
Unrealized foreign currency transaction (gains) losses		(4,123	)		825			(135	)		1,078
Changes in deferred tax assets and liabilities, excluding initial effects of acquisitions		(1,654	)		233			(1,658	)		(1,160	)
Changes in operating assets and liabilities, excluding initial effects of acquisitions:
Accounts receivable		(12,479	)		(12,111	)		(4,905	)		(19,313	)
Inventories		14,196			(12,328	)		(3,475	)		(27,672	)
Prepaid expenses and other current assets		(1,076	)		2,219			(298	)		9,251
Accounts payable		7,493			2,109			(4,769	)		15,941
Accrued expenses, compensation and benefits, and other liabilities		9,806			25,737			(14,323	)		716
Income taxes payable		(548	)		(621	)		(757	)		1,669
Deferred revenues		(10,853	)		(5,947	)		5,611			816
Net cash provided by (used in) operating activities		14,421			7,883			864			(12,671	)

Cash flows from investing activities:
Purchases of property and equipment		(1,909	)		(2,966	)		(10,771	)		(28,892	)
Increase in other long-term assets		(130	)		(441	)		(1,099	)		(523	)
Payments for business acquisitions, net of cash acquired		-			-			-			(27,008	)
Proceeds from sales of assets		-			3,502			-			4,502
Purchases of marketable securities		-			-			-			(2,250	)
Proceeds from sales of marketable securities		-			-			-			19,605
Net cash (used in) provided by investing activities		(2,039	)		95			(11,870	)		(34,566	)

Cash flows from financing activities:
Proceeds from (payments related to) the issuance of common stock under employee stock plans, net		274			797			2,027			736
Proceeds from revolving credit facilities		-			5,000			21,000			5,000
Payments on revolving credit facilities		(13,000	)		(5,000	)		(21,000	)		(5,000	)
Payments for credit facility issuance costs		-			(1,132	)		-			(1,132	)
Net cash (used in) provided by financing activities		(12,726	)		(335	)		2,027			(396	)

Effect of exchange rate changes on cash and cash equivalents		(453	)		778			(948	)		(1,102	)
Net (decrease) increase in cash and cash equivalents		(797	)		8,421			(9,927	)		(48,735	)
Cash and cash equivalents at beginning of period		33,652			34,361			42,782			91,517
Cash and cash equivalents at end of period	$	32,855		$	42,782		$	32,855		$	42,782

Contact:

Avid

PR Contact:

Amy Paladino, 781-772-1005

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IR Contact:

Tom Fitzsimmons, 978-640-3346

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Avid Technology Inc ( AVID )

Avid Announces Results for Fourth Quarter 2011