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):
February 8, 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.) |
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1 Wayside Road
Burlington, Massachusetts 01803
(Address of Principal Executive Offices)
(Zip Code) |
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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):
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act
(17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act
(17 CFR 240.13e-4(c))
TABLE OF CONTENTS
ITEM 2.02 Results of Operation and Financial Condition
On February 8, 2006, Nuance Communications, Inc. announced its preliminary financial results
for the fiscal quarter ended December 31, 2005 and on February 9, 2006 announced its final results
for the fiscal quarter ended December 31, 2005. The press releases, and the reconciliations
contained therein, which have been attached as Exhibits 99.1 and 99.2 and incorporated herein,
disclose financial measures that may be considered non-GAAP financial measures.
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 earnings per share
helpful in assessing the organic performance of the continuing operation of our business from a
cash flow 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 revenue and expenses of the business—excluding certain unplanned costs—which define the
longer term cash flows of the business. While our management uses this non-GAAP financial measure
as a tool to enhance their understanding of certain aspects of our financial performance, our
management does not consider this measure to be a substitute for, or superior to, the information
provided by GAAP earnings per share. Consistent with this approach, we believe that disclosing
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 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 first quarter ended December 31, 2005, and, in
particular, in evaluating our earnings per share, our management has excluded items in three
general categories, each of which are described below.
Acquisition Related Expenses. We 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 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
expenses related to material acquisitions allows the users of our financial statements to review
both the GAAP 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; and (iii) certain accrued income
taxes. 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 either unique or
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: (i)
non-acquisition-related restructuring charges and (ii) redundant costs associated with a change in independent accountants.
We assess our operating performance with these amounts included, but also excluding these amounts;
the amounts relate to costs which are either unique or 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.
The non-GAAP financial measure described above, and used in the attached press releases, 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 GAAP financial measure reflect the 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 our industry, may calculate
non-GAAP net income (loss) differently than we do, limiting it’s usefulness as a comparative tool.
Management compensates for these limitations by providing specific information regarding the GAAP
amounts excluded from the non-GAAP financial measures. In addition, as noted above, our management
evaluates the non-GAAP financial measures together with the most directly comparable GAAP financial
information.
ITEM 9.01 Financial Statements and Exhibits
(c) Exhibits
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99.1 |
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Press Release dated February 8, 2006 by Nuance Communications, Inc. |
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99.2 |
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Press Release dated February 9, 2006 by Nuance Communications, Inc. |