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| NUAN > SEC Filings for NUAN > Form 8-K on 23-Nov-2009 | All Recent SEC Filings |
23-Nov-2009
Results of Operations and Financial Condition
Acquisition-Related Expenses.
In recent years, the Company has completed a number of acquisitions, which
result in operating expenses which would not otherwise have been incurred. The
Company provides supplementary non-GAAP financial measures which exclude certain
transition, integration and other acquisition-related expense items resulting
from acquisitions to allow more accurate comparisons of the financial results to
historical operations, forward-looking guidance and the financial results of
less acquisitive peer companies. The Company considers these types of expenses,
to a great extent, to be unpredictable and dependent on a significant number of
factors that are outside of the control of the Company. Furthermore, such costs
are generally not relevant to assessing or estimating the long-term performance
of the acquired assets as part of the Company. In addition, the size, complexity
and/or volume of past acquisitions, which often drives the magnitude of
acquisition-related expenses, may not be indicative of the size, complexity
and/or volume of future acquisitions. By excluding the above referenced expenses
from our non-GAAP measures, management is better able to evaluate the Company's
ability to utilize its existing assets and estimate the long-term value that
acquired assets will generate for the Company.
These items are included in the following categories: (i) acquisition-related
transition and integration costs; (ii) amortization of intangible assets;
(iii) in-process research and development; and (iv) costs associated with
disputes and regulatory matters related to acquired entities. These categories
are further discussed as follows:
(i) Acquisition-related transition and integration costs. The Company excludes
transition and integration costs such as retention and earn-out bonuses for
employees from acquisitions. The Company does not consider these expenses to be
related to the organic continuing operation of its business, and believes it is
useful to management and investors to understand the effects of these items on
total operating expenses. Although acquisition-related transition and
integration costs are not recurring with respect to past acquisitions, the
Company generally will incur these expenses in connection with any future
acquisitions.
(ii) Amortization of intangible assets. The Company excludes the amortization of
intangible assets from non-GAAP expense and income measures. These amounts are
inconsistent in amount and frequency and are significantly impacted by the
timing and size of acquisitions. Providing a supplemental measure which excludes
these charges allows management and investors to evaluate results "as-if" the
acquired intangible assets had been developed internally rather than acquired
and, therefore, provides a supplemental measure of performance in which the
Company's acquired intellectual property is treated in a comparable manner to
its internally developed intellectual property. Although the Company excludes
amortization of intangible assets from its non-GAAP expenses, the Company
believes that it is important for investors to understand that such intangible
assets contribute to revenue generation. Amortization of intangible assets that
relate to past acquisitions will recur in future periods until such intangible
assets have been fully amortized. Future acquisitions may result in the
amortization of additional intangible assets.
(iii) In-Process research and development. The Company excludes expenses
associated with acquired in-process research and development from non-GAAP
expense and income measures. These amounts are inconsistent in amount and
frequency and are significantly impacted by the timing, size and nature of
acquisitions. Providing a supplemental measure which excludes these charges
allows management and investors to evaluate results "as-if" the acquired
research and development had been conducted internally rather than acquired.
Although expenses associated with acquired in-process research and development
are generally not recurring with respect to past acquisitions, the Company may
incur these expenses in connection with any future acquisitions.
(iv) Costs associated with disputes and regulatory matters related to acquired
entities. The Company excludes expenses incurred as a result of disputes arising
from earnout and indemnification matters related to prior acquisitions. The
Company also incurs post-closing legal and other professional services fees for
non-recurring compliance and regulatory matters associated with acquisitions.
The Company does not consider these expenses to be related to the organic
continuing operations of the acquired businesses, and believes that providing a
supplemental non-GAAP measure which excludes these items allows management and
investors to consider the ongoing operations of the business both with, and
without, such expenses. Although these expenses are not recurring with respect
to past acquisitions, the Company may incur these expenses in connection with
any future acquisitions.
Non-Cash Expenses.
The Company provides non-GAAP information relative to the following non-cash
expenses: (i) stock-based compensation; (ii) certain accrued interest; and
(iii) certain accrued income taxes. These items are further discussed as
follows:
(i) Stock-based compensation. Because of varying available valuation
methodologies, subjective assumptions and the variety of award types, the
Company believes that the exclusion of stock-based compensation allows for more
accurate comparisons of operating results to peer companies, as well as to times
in the Company's history when stock-based compensation was more or less
significant as a portion of overall compensation than in the current period. The
Company evaluates performance both with and without these measures because
compensation expense related to stock-based compensation is typically non-cash
and the options granted are influenced by factors such as volatility and
risk-free interest rates that are beyond the Company's control. The expense
related to stock-based awards is generally not controllable in the short-term
and can vary significantly based on the timing, size and nature of awards
granted. As such, the Company does not include such charges in operating plans.
Stock-based compensation will continue in future periods.
(ii and iii) Certain accrued interest and income taxes. The Company also
excludes certain accrued interest and certain accrued income taxes because the
Company believes that excluding these non-cash expenses provides senior
management as well as other users of the financial statements, with a valuable
perspective on the cash-based performance and health of the business, including
the current near-term projected liquidity. These non-cash expenses will continue
in future periods.
Other Expenses.
The Company excludes certain other expenses that are the result of other,
unplanned events to measure operating performance as well as current and future
liquidity both with and without these expenses. Included in these expenses are
items such as non-acquisition-related restructuring, asset impairment and other
charges (credits), net. These events are unplanned and arose outside of the
ordinary course of continuing operations. These items also include adjustments
from changes in fair value of share-based instruments relating to the issuance
of our common stock with security price guarantees payable in cash. The Company
assesses 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 the Company believes management and the users of the
financial statements are better able to understand the financial results of what
the Company considers to be organic continuing operations.
The Company believes that providing the non-GAAP information to investors, in
addition to the GAAP presentation, allows investors to view the financial
results in the way management views the operating results. The Company further
believes that providing this information allows investors to not only better
understand the Company's financial performance but more importantly, to evaluate
the efficacy of the methodology and information used by management to evaluate
and measure such performance.
ITEM 9.01 Financial Statements and Exhibits
(d) Exhibits
99.1 Press Release dated November 23, 2009 by Nuance Communications, Inc.
99.2 Supplemental Financial Information
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