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): October 31, 2006
NUANCE COMMUNICATIONS, INC.
(Exact name of registrant as specified in its charter)
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Delaware
(State or other jurisdiction of
incorporation) |
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000-27038
(Commission
File Number) |
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94-3156479
(IRS Employer
Identification No.) |
1 Wayside Road
Burlington, Massachusetts 01803
(Address of Principal Executive Offices)
(Zip Code)
Registrant’s telephone number, including area code: (781) 565-5000
(Former name or former address, if changed since last report)
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):
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
ITEM 2.02 Results of Operation and Financial Condition
On October 31, 2006, Nuance Communications, Inc., formerly ScanSoft, Inc. announced its preliminary
financial results for the fiscal quarter ended September 30, 2006.
Management utilizes a number of different financial measures, both GAAP and non-GAAP, in analyzing
and assessing the overall performance of our business, for making operating decisions and for
forecasting and planning for future periods. We consider the use of non-GAAP revenue helpful in
understanding the performance of our business, as it excludes the purchase accounting impact on
acquired deferred revenue. We also consider the use of non-GAAP earnings per share helpful in
assessing the organic performance of the continuing operation of our business from a cash
perspective. By organic performance we mean performance as if we had not incurred certain costs
and expenses associated with acquisitions. By continuing operations we mean the ongoing results of
the business excluding certain unplanned costs. While our management uses these non-GAAP financial
measures as a tool to enhance their understanding of certain aspects of our financial performance,
our management does not consider these measures to be a substitute for, or superior to, the
information provided by GAAP revenue and earnings per share. Consistent with this approach, we
believe that disclosing non-GAAP revenue and non-GAAP earnings per share to the readers of our
financial statements provides such readers with useful supplemental data that, while not a
substitute for GAAP revenue and earnings per share, allows for greater transparency in the review
of our financial and operational performance. In assessing the overall health of our business
during the fiscal fourth quarter ended September 30, 2006, and, in particular, in evaluating our
revenue and earnings per share, our management has either included or excluded items in three
general categories, each of which are described below.
Acquisition Related Revenues and Expenses. We included revenue related to our acquisition of
Dictaphone that we would otherwise recognize but for the purchase accounting treatment of this
transaction to allow for more accurate comparisons to our financial results of our historical
operations, forward looking guidance and the financial results of our peer companies. We also
excluded certain expense items resulting from acquisitions to allow more accurate comparisons of
our financial results to our historical operations, forward looking guidance and the financial
results of our peer companies. These items include the following: (i) acquisition-related
integration and transition costs; (ii) amortization of intangible assets associated with our
acquisitions; and (iii) costs associated with the investigation of the restatement of the financial
results of an acquired entity (SpeechWorks International, Inc.). In recent years, we have
completed a number of acquisitions, which result in non-continuing operating expenses which would
not otherwise have been incurred. For example, we have incurred transition and integration costs
such as retention bonuses for Former Nuance employees. In addition, actions taken by an acquired
company, prior to an acquisition, could result in expenses being incurred by us, such as expenses
incurred as a result of the restatement of the financial results of SpeechWorks International, Inc.
We believe that providing non-GAAP information for certain revenue and expenses related to
material acquisitions allows the users of our financial statements to review both the GAAP revenue
and expenses in the period, as well as the non-GAAP expenses, thus providing for enhanced
understanding of our historic and future financial results and facilitating comparisons to less
acquisitive peer companies. Additionally, had we internally developed the products acquired, the
amortization of intangible assets would have been expensed historically, and we believe the
assessment of our operations excluding these costs is relevant to our assessment of internal
operations and comparisons to industry performance.
Non-Cash Expenses. We provide non-GAAP information relative to the following non-cash expenses:
(i) stock-based compensation; (ii) certain accrued interest; (iii) certain accrued income taxes;
and (iv) impairment of intangible assets. Because of varying available valuation methodologies,
subjective assumptions and the variety of award types, we believe that the
exclusion of stock-based compensation allows for more accurate comparisons of our operating results
to our peer companies. Further, we believe that excluding stock-based compensation expense allows
for a more accurate comparison of our financial results to previous periods during which our equity
compensation programs relied more heavily on equity-based awards that were not required to be
reflected on our income statement. We believe that excluding non-cash interest expense and
non-cash income taxes provides our senior management as well as other users of our financial
statements, with a valuable perspective on the cash based performance and health of the business,
including our current near-term projected liquidity.
Other Expenses. We exclude certain other expenses that are the result of other, unplanned events
to measure our operating performance as well as our current and future liquidity both with and
without these expenses. Included in these expenses are items such as non-acquisition-related
restructuring charges. These events are unplanned and arose outside of the ordinary course of our
continuing operations. We assess our operating performance with these amounts included, but also
excluding these amounts; the amounts relate to costs which are unplanned, and therefore by
providing this information we believe our management and the users of our financial statements are
better able to understand the financial results of what we consider to be our organic continuing
operations.
We believe that providing the non-GAAP information to investors, in addition to the GAAP
presentation, allows investors to view our financial results in the way management views the
operating results. We further believe that providing this information allows investors to not only
better understand our financial performance but more importantly, to evaluate the efficacy of the
methodology and information used by management to evaluate and measure such performance.
The non-GAAP financial measures described above, and used in the attached press release, should not
be considered in isolation from, or as a substitute for, a measure of financial performance
prepared in accordance with GAAP. Further, investors are cautioned that there are material
limitations associated with the use of non-GAAP financial measures as an analytical tool. In
particular, many of the adjustments to the Company’s GAAP financial measures reflect the inclusion
or exclusion of items that are recurring and will be reflected in the Company’s financial results
for the foreseeable future. In addition, other companies, including other companies in the
Company’s industry, may calculate non-GAAP net income (loss) differently than the Company, limiting
it’s usefulness as a comparative tool. Management compensates for these limitations by providing
specific information regarding the GAAP amounts included and excluded from the non-GAAP financial
measures. In addition, as noted above, the Company’s management evaluates the non-GAAP financial
measures together with the most directly comparable GAAP financial information.
The information in this Form 8-K and the Exhibit attached hereto is being furnished and shall not
be deemed to be “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as
amended (the “Exchange Act”) or otherwise subject to the liabilities of that section, nor shall it
be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended,
or the Exchange Act, regardless of any general incorporation language in such filing.
ITEM 9.01 Financial Statements and Exhibits
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Press Release dated October 31, 2006 by Nuance Communications, Inc. |