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SeaChange International Inc. Reports Operating Results (10-Q)

June 09, 2010 | About:
10qk

10qk

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SeaChange International Inc. (SEAC) filed Quarterly Report for the period ended 2010-04-30.

Seachange International Inc. has a market cap of $233.7 million; its shares were traded at around $7.52 with a P/E ratio of 41.8 and P/S ratio of 1.2. SEAC is in the portfolios of Paul Tudor Jones of The Tudor Group, Jim Simons of Renaissance Technologies LLC.

Highlight of Business Operations:

The Company s previously reported unaudited first quarter fiscal 2011 financial results included in the Company s earnings release issued May 27, 2010 understated income tax expense by $5.8 million related principally to the accounting for income taxes resulting from the sale of the Company s entire ownership interest in Casa. As a result, the financial results contained in this report with respect to the three months ended April 30, 2010 differ from the Company s previously issued financial results in that the Company realized an income tax provision of $594,000 and not an income tax benefit of $5.2 million, the Company realized net income of $18.9 million and not net income of $24.6 million, the Company realized basic earnings per share of $0.60 and not $0.79, and the Company realized diluted earnings per share of $0.59 and not $0.78. This revision of previously reported tax expense did not change the Company s previously reported non-GAAP financial results for the three months ended April 30, 2010.

Amortization of intangible assets. Amortization expense consists of the amortization of acquired intangible assets which are operating expenses and not considered costs of revenues. In the three months ended April 30, 2010 and 2009, amortization expense was $898,000 and $479,000, respectively. An additional $445,000 and $51,000 of amortization expense related to acquired technology was charged to cost of sales for the three months ended April 30, 2010 and 2009, respectively, with the increase in the three months ended April 30, 2010 being due to amortization expense of the intangible assets related to the acquisition of eventIS and VividLogic.

Gain on sale of investment in affiliate. On April 26, 2010, the Company sold its entire 19.8% ownership interest in Casa Systems, Inc. (“Casa”) back to Casa, a Massachusetts development stage company that specializes in video-on-demand products with the telecommunications and television markets, for $34.1 million realizing a pre-tax profit of $25.2 million which was included in the Consolidated Statement of Operations.

Other(expense) income, net. Other (expense) income, net was a $542,000 expense in the three months ended April 30, 2010, compared to $135,000 of income in the three months ended April 30, 2009. The $542,000 of expense for the three months ended April 30, 2010 was comprised of $54,000 of interest expense and $480,000 of foreign exchange losses. The $135,000 of income for the three months ended April 30, 2009, was comprised of $209,000 of net interest income and $74,000 of translation loss. Translation gains and losses at our various foreign subsidiaries (where the functional currency is the US Dollar) are derived from fluctuations in exchange rates between the various currencies and the U.S dollar.

Equity Loss in Earnings of Affiliates. Equity loss in earnings of affiliates was $112,000 and $197,000 in the three months ended April 30, 2010 and 2009, respectively. For the three months ended April 30, 2010, $250,000 of equity loss was recognized from On Demand Deutschland, net of $138,000 in accreted gains related to customer contracts and content licensing agreements and a capital distribution related to reimbursement of previously incurred costs. For the three months ended April 30, 2009, the On Demand Deutschland loss was $328,000 net of $131,000 in accreted gains related to customer contracts and content licensing agreements and a capital distribution related to reimbursement of previously incurred costs.

Income Tax Provision. Our effective tax rate was a provision of 3% and 17% for the three months ended April 30, 2010 and 2009, respectively. Our income tax provision consists of federal, foreign, and state income taxes. As disclosed above in the overview, the Company s previously reported unaudited first quarter fiscal 2011 financial results included in the Company s earnings release issued May 27, 2010 understated income tax expense by $5.8 million related principally to the accounting for income taxes resulting from the sale of the Company s entire ownership interest in Casa. As a result, the financial results contained in this report with respect to the three months ended April 30, 2010 differ from the Company s previously issued financial results in that the Company realized an income tax provision of $594,000 and not an income tax benefit of $5.2 million, the Company realized net income of $18.9 million and not net income of $24.6 million, the Company realized basic earnings per share of $0.60 and not $0.79, and the Company realized diluted earnings per share of $0.59 and not $0.78. This revision of previously reported tax expense did not change the Company s previously reported non-GAAP financial results for the three months ended April 30, 2010.

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