UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
For the quarterly period ended July 31, 2014
OR
For the transition period from to
Commission File Number: 0-21393
SEACHANGE INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
50 Nagog Park,
Acton, MA 01720
(Address of principal executive offices, including zip code)
Registrant’s telephone number, including area code: (978) 897-0100
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days. YES x NO ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). YES x NO ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.): YES ¨ NO x
The number of shares outstanding of the registrant’s Common Stock on September 2, 2014 was 32,587,345.
Table of Contents
Financial Statements (interim periods unaudited)
Consolidated Balance Sheets at July 31, 2014 and January 31, 2014
Consolidated Statements of Operations and Comprehensive (Loss) Income for the three and six months ended July 31, 2014 and July 31, 2013
Consolidated Statements of Cash Flows for the six months ended July 31, 2014 and July 31, 2013
Notes to Consolidated Financial Statements
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Quantitative and Qualitative Disclosures About Market Risk
Controls and Procedures
Legal Proceedings
Risk Factors
Unregistered Sales of Equity Securities and Use of Proceeds
Exhibits
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PART I – FINANCIAL INFORMATION
ITEM 1. Financial Statements
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except share data)
Assets
Current assets:
Cash and cash equivalents
Marketable securities
Accounts and other receivables, net of allowance for doubtful accounts of $410 and $327 at July 31, 2014 and January 31, 2014, respectively
Unbilled receivables
Inventories
Prepaid expenses and other current assets
Total current assets
Property and equipment, net
Marketable securities, long-term
Investments in affiliates
Intangible assets, net
Goodwill
Other assets
Total assets
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable
Other accrued expenses
Deferred revenues
Total current liabilities
Deferred revenue
Other liabilities
Taxes payable
Deferred tax liabilities
Total liabilities
Commitments and contingencies (Note 5)
Stockholders’ equity:
Common stock, $0.01 par value; 100,000,000 shares authorized; 32,658,408 shares issued and 32,618,624 outstanding at July 31, 2014, and 33,037,671 shares issued and 32,997,887 outstanding at January 31, 2014
Additional paid-in capital
Treasury stock, at cost; 39,784 common shares
Accumulated loss
Accumulated other comprehensive loss
Total stockholders’ equity
Total liabilities and stockholders’ equity
The accompanying notes are an integral part of these unaudited, consolidated financial statements.
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CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS) INCOME
(Unaudited, amounts in thousands, except per share data)
Revenues:
Product
Service
Total revenues
Cost of revenues:
Amortization of intangible assets
Stock-based compensation expense
Total cost of revenues
Gross profit
Operating expenses:
Research and development
Selling and marketing
General and administrative
Earn-outs and change in fair value of earn-outs
Professional fees—other
Severance and other restructuring costs
Total operating expenses
(Loss) income from operations
Other (expenses) income, net
(Loss) income before income taxes and equity income in earnings of affiliates
Income tax provision (benefit)
Equity income in earnings of affiliates, net of tax
(Loss) income from continuing operations
Income (loss) from discontinued operations, net of tax
Net loss
Other comprehensive (loss) income, net of tax:
Foreign currency translation adjustment
Unrealized loss on marketable securities
Comprehensive (loss) income
Net loss per share:
Basic loss per share
Diluted loss per share
Net (loss) income per share from continuing operations:
Basic (loss) income per share
Diluted (loss) income per share
Net income (loss) per share from discontinued operations:
Basic income (loss) per share
Diluted income (loss) per share
Weighted average common shares outstanding:
Basic
Diluted
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CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, amounts in thousands)
Cash flows from operating activities:
Net (income) loss from discontinued operations
Adjustments to reconcile net loss to net cash (used in) provided by operating activities from continuing operations:
Depreciation of property and equipment
Other
Changes in operating assets and liabilities:
Accounts receivable
Prepaid expenses and other assets
Accrued expenses
Net cash (used in) provided by operating activities from continuing operations
Net cash provided by (used in) operating activities from discontinued operations
Total cash (used in) provided by operating activities
Cash flows from investing activities:
Purchases of property and equipment
Purchases of marketable securities
Proceeds from sale and maturity of marketable securities
Proceeds from sale of equity investments
Investment in affiliate
Acquisition of businesses and payment of contingent consideration, net of cash acquired
Other investing activities, net
Net cash used in investing activities from continuing operations
Net cash provided by investing activities from discontinued operations
Total cash (used in) provided by investing activities
Cash flows from financing activities:
Repurchases of common stock
Proceeds from issuance of common stock relating to stock option exercises
Total cash (used in) provided by financing activities
Effect of exchange rate changes on cash
Net (decrease) increase in cash and cash equivalents
Cash and cash equivalents, beginning of period
Cash and cash equivalents, end of period
Supplemental disclosure of cash flow information:
Income taxes paid
Supplemental disclosure of non-cash activities:
Transfer of items originally classified as inventories to equipment
The accompanying notes are an integral part of these unaudited, consolidated financial statements
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Nature of Business and Basis of Presentation
The Company
SeaChange International, Inc. and its subsidiaries (“SeaChange”, “we”, or the “Company”) is an industry leader in the delivery of multi-screen video. Our products and services facilitate the aggregation, licensing, management and distribution of video (primarily movies and television programming) and television advertising content to cable television system operators and telecommunications companies.
Basis of Presentation
The accompanying unaudited consolidated financial statements include the accounts of SeaChange International, Inc. and its subsidiaries (“SeaChange” or the “Company”) and are prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial reports as well as rules and regulations of the Securities and Exchange Commission (“SEC”). All intercompany transactions and balances have been eliminated. Certain information and footnote disclosures normally included in financial statements prepared under U.S. GAAP have been condensed or omitted pursuant to such regulations. However, we believe that the disclosures are adequate to make the information presented not misleading. In the opinion of management, the accompanying financial statements include all adjustments necessary to present a fair presentation of the consolidated financial statements for the periods shown. These consolidated financial statements should be read in conjunction with our most recently audited financial statements and related footnotes included in our Annual Report on Form 10-K (“Form 10-K”) as filed with the SEC. The balance sheet data as of January 31, 2014 that is included in this Form 10-Q was derived from our audited financial statements. We have reclassified certain fiscal 2014 data to conform to our fiscal 2015 presentation.
The preparation of these financial statements in conformity with U.S. GAAP, requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and disclosure of contingent assets and liabilities. Interim results are not necessarily indicative of the operating results for the full fiscal year or any future periods and actual results may differ from our estimates. During the three and six months ended July 31, 2014, there have been no material changes to our significant accounting policies that were described in our fiscal 2014 Form 10-K, as filed with the SEC.
2. Fair Value Measurements
Definition and Hierarchy
The applicable accounting guidance defines fair value as the exchange price that would be received for an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The guidance establishes a framework for measuring fair value and expands required disclosure about the fair value measurements of assets and liabilities. This guidance requires us to classify and disclose assets and liabilities measured at fair value on a recurring basis, as well as fair value measurements of assets and liabilities measured on a non-recurring basis in periods subsequent to initial measurement, in a fair value hierarchy.
The fair value hierarchy is broken down into three levels based on the reliability of inputs and requires an entity to maximize the use of observable inputs, where available. The following summarizes the three levels of inputs required, as well as the assets and liabilities that we value using those levels of inputs:
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Valuation Techniques
When developing fair value estimates for certain financial assets and liabilities, we maximize the use of observable inputs and minimize the use of unobservable inputs. When available, we use quoted market prices, market comparables and discounted cash flow projections. Financial instruments include money market funds, U.S. treasury notes or bonds and U.S. government agency bonds.
In general, and where applicable, we use quoted prices in active markets for identical assets or liabilities to determine fair value. If quoted prices in active markets for identical assets or liabilities are not available to determine fair value, then we use quoted prices for similar assets and liabilities or inputs that are observable either directly or indirectly. In periods of market inactivity, the observability of prices and inputs may be reduced for certain instruments. This condition could cause an instrument to be reclassified from Level 1 to Level 2 or from Level 2 to Level 3.
The following tables set forth our financial assets and liabilities that were accounted for at fair value on a recurring basis as of July 31, 2014 and January 31, 2014:
Financial assets:
Cash
Money market accounts (a)
Available for sale marketable securities:
Current marketable securities:
U.S. treasury notes and bonds—conventional
U.S. government agency issues
Non-current marketable securities:
Total
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Available-For-Sale Securities
We determine the appropriate classification of debt investment securities at the time of purchase and re-evaluate such designation as of each balance sheet date. Our investment portfolio consists of money market funds, U.S. treasury notes and bonds, and U.S. government agency notes and bonds as of July 31, 2014 and January 31, 2014. All highly liquid investments with an original maturity of three months or less when purchased are considered to be cash equivalents. All cash equivalents are carried at cost, which approximates fair value. Our marketable securities are classified as available-for-sale and are reported at fair value with unrealized gains and losses, net of tax, reported in stockholders’ equity as a component of accumulated other comprehensive loss. The amortization of premiums and accretion of discounts to maturity are computed under the effective interest method and are included in other (expenses) income, net, in our consolidated statements of operations and comprehensive (loss) income. Interest on securities is recorded as earned and is also included in other (expenses) income, net. Any realized gains or losses would be shown in the accompanying consolidated statements of operations and comprehensive (loss) income in other (expenses) income, net. We provide fair value measurement disclosures of available-for-sale securities in accordance with one of three levels of fair value measurement mentioned above.
The following is a summary of available-for-sale securities, including the cost basis, aggregate fair value and gross unrealized gains and losses, for cash equivalents, short- and long-term marketable securities portfolio as of July 31, 2014 and January 31, 2014:
July 31, 2014:
Cash equivalents
U.S. treasury notes and bonds—short-term
U.S. treasury notes and bonds—long-term
U.S. government agency issues—short-term
U.S. government agency issues—long-term
Total cash, cash equivalents and marketable securities
January 31, 2014:
The following is a schedule of the contractual maturities of available-for-sale investments as of July 31, 2014 (amounts in thousands):
Maturity of one year or less
Maturity between one and five years
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3. Inventories
Inventories consist primarily of hardware and related component parts and are stated at the lower of cost (on a first-in, first-out basis) or market. Inventories consist of the following:
Components and assemblies
Finished products
Total inventory
4. Goodwill and Intangible Assets
Changes in the carrying amount of goodwill for the six months ended July 31, 2014 were as follows:
Balance at January 31, 2014
Cumulative translation adjustment
Balance at July 31, 2014
We are required to perform impairment tests related to our indefinite-lived assets annually, which we perform during the third quarter of each fiscal year or sooner if an indicator of impairment occurs. While no impairment charges resulted from our annual test, or any analysis performed during the interim periods since our annual test, impairment charges may occur in the future as a result of changes in projected growth and other factors.
Intangible Assets
Intangible assets, net, consisted of the following:
Finite-lived intangible assets:
Customer contracts
Non-compete agreements
Completed technology
Trademarks, patents and other
Total finite-lived intangible assets
Indefinite-lived intangible assets:
Trade names
Total indefinite-lived intangible assets
Total intangible assets
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As of July 31, 2014, the estimated future amortization expense for our finite-lived intangible assets for the remainder of fiscal year 2015, the four succeeding fiscal years and thereafter is as follows (amounts in thousands):
Fiscal Year Ended January 31,
2015 (for the remaining six months)
2016
2017
2018
2019
2020 and thereafter
5. Commitments and Contingencies
Indemnification and Warranties
We provide indemnification, to the extent permitted by law, to our officers, directors, employees and agents for liabilities arising from certain events or occurrences while the officer, director, employee or agent is, or was, serving at our request in such capacity. With respect to acquisitions, we provide indemnification to, or assume indemnification obligations for, the current and former directors, officers and employees of the acquired companies in accordance with the acquired companies’ bylaws and charters. As a matter of practice, we have maintained directors’ and officers’ liability insurance including coverage for directors and officers of acquired companies.
We enter into agreements in the ordinary course of business with customers, resellers, distributors, integrators and suppliers. Most of these agreements require us to defend and/or indemnify the other party against intellectual property infringement claims brought by a third party with respect to our products. From time to time, we also indemnify customers and business partners for damages, losses and liabilities they may suffer or incur relating to personal injury, personal property damage, product liability, and environmental claims relating to the use of our products and services or resulting from the acts or omissions of us, our employees, authorized agents or subcontractors. From time to time we have received requests from customers for indemnification of patent litigation claims. Management cannot reasonably estimate any potential losses, but these claims could result in material liability for us. There are no current pending legal proceedings, in the opinion of management that would have a material adverse effect on our financial position, results from operations and cash flows. There is no assurance that future legal proceedings arising from ordinary course of business or otherwise, will have a material adverse effect on our financial position, results from operations or cash flows.
We warrant that our products, including software products, will substantially perform in accordance with our standard published specifications in effect at the time of delivery. In addition, we provide maintenance support to our customers and therefore allocate a portion of the product purchase price to the initial warranty period and recognize revenue on a straight line basis over that warranty period related to both the warranty obligation and the maintenance support agreement. When we receive revenue for extended warranties beyond the standard duration, it is deferred and recognized on a straight line basis over the contract period. Related costs are expensed as incurred.
Revolving Line of Credit/Demand Note Payable
We have a Demand Promissory Note in the aggregate amount of $20.0 million (the “Line of Credit”) with JP Morgan Chase Bank, N.A. (“JP Morgan”). Borrowings under the Line of Credit will be used to finance working capital needs and for general corporate purposes. The Line of Credit expires on November 27, 2014. We currently do not have any borrowings nor do we have any financial covenants under this line.
6. Severance and Other Restructuring Costs
During the three and six months ended July 31, 2014, we incurred restructuring charges of $0.2 million and $0.7 million, respectively, related to severance costs for terminated employees in the three and six month periods ended July 31, 2014.
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The following table shows the change in balances of our severance liability for three and six months ended July 31, 2014. These amounts are reported as a component of other accrued expenses on the consolidated balance sheet as of July 31, 2014 (amounts in thousands):
Accrual balance at the beginning of the period
Severance charges accrued
Severance costs paid
Accrual balance as of July 31, 2014
7. Stock Repurchase Program
On September 4, 2013, our Board of Directors authorized the repurchase of up to $25.0 million of our common stock through a share repurchase program which would have terminated on January 31, 2015. On May 31, 2014, this program was amended to increase the authorized repurchase amount to $40.0 million and extend the termination date to April 30, 2015. Under the program, we are authorized to repurchase shares through Rule 10b5-1 plans, open market purchases, privately negotiated transactions, block purchases or otherwise in accordance with applicable federal securities laws, including Rule 10b-18 of the Securities Exchange Act of 1934. This share repurchase program does not obligate us to acquire any specific number of shares and may be suspended or discontinued at any time. All repurchases are expected to be funded from our current cash and investment balances. The timing and amount of shares to be repurchased will be based on market conditions and other factors, including price, corporate and regulatory requirements, and alternative investment opportunities. Any shares repurchased by us under the share repurchase program will reduce the number of shares outstanding. Pursuant to the share repurchase program, we executed a Rule 10b5-1 plan in June 2014 to repurchase shares. During the three months ended July 31, 2014, we used $2.0 million of cash in connection with the repurchase of 252,120 shares of our common stock (an average price of $7.93 per share). During the six months ended July 31, 2014, we used $5.5 million of cash in connection with the repurchase of 591,520 shares of our common stock (an average price of $9.31 per share). As of July 31, 2014, $34.5 million remained available under the existing share repurchase authorization.
8. Stock Incentive Plans
2011 Compensation and Incentive Plan
In July 2011, our stockholders approved the adoption of our 2011 Compensation and Incentive Plan (the “2011 Plan”). Under the 2011 Plan, as amended in July 2013, the number of authorized shares of common stock is equal to 5,300,000 shares plus the number of shares that expired, terminated, surrendered or forfeited awards subsequent to July 20, 2011 under the Amended and Restated 2005 Equity Compensation and Incentive Plan (the “2005 Plan”). Following approval of the 2011 Plan, we terminated the 2005 Plan. The 2011 Plan provides for the grant of incentive stock options, nonqualified stock options, restricted stock, restricted stock units (“RSUs”), and other equity based non-stock option awards as determined by the plan administrator by officers, employees, consultants, and directors of the Company.
We may satisfy awards upon the exercise of stock options or vesting of RSUs with newly issued shares or treasury shares. The Board of Directors is responsible for the administration of the 2011 Plan and determining the terms of each award, award exercise price, the number of shares for which each award is granted and the rate at which each award vests. In certain instances the Board of Directors may elect to modify the terms of an award.
Option awards may be granted to employees at an exercise price per share of not less than 100% of the fair market value per common share on the date of the grant. RSUs and other equity-based non-stock option awards may be granted to any officer, employee, director, or consultant at a purchase price per share as determined by the Board of Directors. Awards granted under the 2011 Plan generally vest over three years and expire seven years from the date of the grant.
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9. Accumulated Other Comprehensive Loss
The following shows the changes in the components of accumulated other comprehensive loss for the six months ended July 31, 2014:
Other comprehensive loss
Comprehensive loss consists of net loss and other comprehensive loss, which includes foreign currency translation adjustments and changes in unrealized gains and losses on marketable securities available for sale. For purposes of comprehensive loss disclosures, we do not record tax expense or benefits for the net changes in the foreign currency translation adjustments, as we intend to permanently reinvest all undistributed earnings of our foreign subsidiaries.
10. Segment Information, Significant Customers and Geographic Information
Segment Information
Our operations are organized into one reportable segment. Operating segments are defined as components of an enterprise evaluated regularly by the Company’s chief operating decision maker in deciding how to allocate resources and assess performance. Our reportable segment was determined based upon the nature of the products offered to customers, the market characteristics of each operating segment and the Company’s management structure.
Significant Customers
The following summarizes revenues by significant customer where such revenue exceeded 10% of total revenues for the indicated period:
Customer A
Customer B
Customer C
Geographic Information
The following table summarizes revenues by customers’ geographic locations for the periods presented:
Revenues by customers’ geographic locations:
North America(1)
Europe and Middle East
Latin America
Asia Pacific and other international locations
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U.S. Revenue
% of total revenues
11. Income Taxes
We recorded an income tax provision from continuing operations of $0.2 million for the three months ended July 31, 2014 and an income tax benefit of $0.1 million for the six month period. The benefit for the year is attributable to foreign losses that can be benefitted.
Our effective tax rate in fiscal 2015 and in future periods may fluctuate on a quarterly basis as a result of changes in the valuation of our deferred tax assets, changes in actual results versus our estimates, or changes in tax laws, regulations, accounting principles, or interpretations thereof. We regularly review our tax positions in each significant taxing jurisdiction in the process of evaluating our unrecognized tax benefits. We make adjustments to our unrecognized tax benefits when: i) facts and circumstance regarding a tax position change, causing a change in management’s judgment regarding that tax position; ii) a tax position is effectively settled with a tax authority; and/or iii) the statute of limitations expires regarding a tax position.
We file income tax returns in U.S. federal jurisdiction, various state jurisdictions, and various foreign jurisdictions. We are no longer subject to U.S. federal examinations before fiscal 2010. However, the taxing authorities still have the ability to review the propriety of certain tax attributes created in closed years if such tax attributes are utilized in an open tax year. Presently, we are undergoing an IRS audit for the fiscal years 2010 through 2012.
12. Net Loss Per Share
Net loss per share is presented in accordance with authoritative guidance which requires the presentation of “basic” and “diluted” earnings per share. Basic net loss per share is computed by dividing earnings available to common shareholders by the weighted-average shares of common stock outstanding during the period. For the purposes of calculating diluted earnings per share, the denominator includes both the weighted average number of shares of common stock outstanding during the period and the weighted average number of shares of potential dilutive shares of common stock, such as stock options and RSUs, calculated using the treasury stock method. Basic and diluted net loss per share was the same for the periods presented as the impact of potential dilutive shares outstanding was anti-dilutive.
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The following table sets forth our computation of basic and diluted net loss per common share (amounts in thousands, except per share amounts):
Net (loss) income from continuing operations
Net income (loss) from discontinued operations
Weighted average shares used in computing net loss per share—basic
Effect of dilutive shares:
Stock options
Restricted stock units
Dilutive potential common shares
Weighted average shares used in computing net loss per share—diluted
Net loss per share—basic:
Income (loss) from discontinued operations
Net loss per share—basic
Net loss per share—diluted:
Net loss per share—diluted
The number of common shares used in the computation of diluted net loss per share in the three and six months ended July 31, 2014 and 2013 does not include the effect of the following potentially outstanding common shares because the effect would have been anti-dilutive:
13. Recent Accounting Standard Updates
We consider the applicability and impact of all ASUs. ASUs not listed below were assessed and determined to be either not applicable or are expected to have minimal impact on our consolidated financial position or results of operations.
Recent Accounting Guidance Not Yet Effective
Accounting For Share-Based Payments- Performance Target Could Be Achieved after the Requisite Service Period
In June 2014, the FASB issued ASU No. 2014-12, “Compensation—Stock Compensation (Topic 718)—Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period.” ASU 2014-12 requires that a performance target which affects vesting and that could be achieved after the requisite service period be treated as a performance condition by applying existing guidance in Topic 718 as it relates to awards with performance conditions. The amendment also specifies the period over which compensation costs should be recognized. The amendment is effective for annual reporting periods and interim periods within those annual periods beginning after December 15, 2015. Early adoption is permitted. We are currently evaluating the impact of the adoption of ASU 2014-12 on our consolidated financial statements.
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Revenue from Contracts with Customers
In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers (Topic 606),” to clarify the principles for recognizing revenue and to develop a common revenue standard for U.S. GAAP and the International Financial Reporting Standards. This guidance supersedes previously issued guidance on revenue recognition and gives a five step process an entity should follow so that the entity recognizes revenue that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This new guidance will be effective for our fiscal 2018 reporting period and must be applied either retrospectively during each prior reporting period presented or retrospectively with the cumulative effect of initially applying this guidance recognized at the date of the initial application. Early adoption is not permitted. We are currently evaluating the impact of the adoption of this ASU on our consolidated financial statements.
Reporting Discontinued Operations and Disposals of Components of an Entity
In April 2014, the FASB issued ASU 2014-08, “Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360) – Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity,” which changes the criteria for reporting discontinued operations while enhancing disclosures in this area. The amended guidance requires that a disposal representing a strategic shift that has (or will have) a major effect on an entity’s financial results or a business activity classified as held for sale should be reported as discontinued operations. This guidance also expands the disclosures required when an entity reports a discontinued operation or when it disposes of or classifies as held for sale an individually significant component that does not meet the definition of a discontinued operation. This new guidance will be effective prospectively on disposals (or classifications of held for sale) of components of an entity that occur within our fiscal year beginning on February 1, 2015. Early adoption is permitted but only for disposals (or classification as held for sale) that have not been reported in financial statements previously issued or available for issuance. We are currently evaluating the impact of the adoption of this ASU on our consolidated financial statements.
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Statements
This Form 10-Q contains or incorporates forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, which involve risks and uncertainties. The following information should be read in conjunction with the unaudited consolidated financial information and the notes thereto included in this Form 10-Q. You should not place undue reliance on these forward-looking statements. Actual events or results may differ materially due to competitive factors and other factors referred to in Part I, Item 1A. “Risk Factors” in our Form 10-K for our fiscal year ended January 31, 2014 and elsewhere in this Form 10-Q. These factors may cause our actual results to differ materially from any forward-looking statement. These forward-looking statements are based on current expectations, estimates, forecasts and projections about the industry and markets in which we operate, and management’s beliefs and assumptions. We undertake no obligation to update or revise the statements in light of future developments. In addition, other written or oral statements that constitute forward-looking statements may be made by us or on our behalf. Words such as “expect,” “anticipate,” “intend,” “plan,” “believe,” “could,” “estimate,” “may,” “target,” “project,” or variations of such words and similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance and involve certain risks, uncertainties, and assumptions that are difficult to predict.
Business Overview
We are an industry leader in the delivery of multi-screen video headquartered in Acton, Massachusetts. Our products and services facilitate the aggregation, licensing, management and distribution of video (primarily movies and television programming) and television advertising content for cable television system operators, telecommunications and media companies. We currently operate under one reporting segment.
Our focus in fiscal 2015 continues to be:
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We continue to experience fluctuations in our revenues from quarter to quarter due to the following factors:
In addition, many customers may delay or reduce capital expenditures. This, together with other factors, could result in reductions in sales of our products, longer sales cycles, difficulties in collection of accounts receivable, a longer period of time before we may recognize revenue attributable to a sale, excess and obsolete inventory, gross margin deterioration, slower adoption of new technologies and increased price competition.
Our operating results are significantly influenced by a number of factors, including the mix of products sold and services provided, pricing and costs of materials used in our products. We price our products and services based upon our costs and consideration of the prices of competitive products and services in the marketplace. We expect our financial results to vary from quarter to quarter and our historical financial results are not necessarily indicative of future performance. We believe that international revenues will continue to be a significant portion of our business. Therefore, we expect that movements in foreign exchange rates will have an impact on our financial condition and results of operations.
Results of Operations
The following discussion summarizes the key factors our management believes are necessary for an understanding of our consolidated financial statements.
Revenues
The following table summarizes information about our revenues for the three and six months ended July 31, 2014 and 2013:
Software Revenues:
Cost of product revenues
Cost of service revenues
Gross product profit margin
Gross service profit margin
Gross profit margin
Product Revenue. Product revenue for the three and six months ended July 31, 2014 decreased $7.4 million, or 46%, and $17.2 million, or 56%, respectively, over the same periods of fiscal 2014. There was a 55% and 65% decrease in legacy product revenue, respectively, for the three and six month periods, primarily related to the decline in our legacy middleware, VOD streamer and video products. We expect our product revenue to decline in fiscal 2015 as compared to fiscal 2014 as revenue from our next generation product will not offset the significant decline in our legacy products.
Service Revenue. Service revenue remained relatively stable for the three months ended July 31, 2014 when compared to the same period of fiscal 2013. Service revenue for the six months ended July 31, 2014 decreased $1.6 million, or 4%, as compared to the same period of fiscal 2014, primarily due to lower video gateway software service revenue.
For the second quarter of fiscal 2015 and fiscal 2014, three customers accounted for 43% and 51% of our total revenues, respectively. For the first half of fiscal 2015 and fiscal 2014 these same three customers accounted for 45% and 53% of our total revenues, respectively. We believe that a significant amount of our revenues will continue to be derived from a limited number of customers.
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International sales accounted for 40% and 45% of total revenues in the second quarter of fiscal 2015 and fiscal 2014, respectively. For the six months ended July 31, 2014 and 2013, international sales accounted for 42% and 51% of total revenues. We believe that international product and service revenues will continue to be a significant portion of our business in the future.
Gross Profit and Margin. Cost of product revenues consists primarily of the cost of purchased material components and subassemblies, labor and overhead relating to the final assembly and testing of complete systems and related expenses, and labor and overhead costs related to software development contracts. Our gross profit margin decreased approximately six percentage points for the three months ended and seven percentage points for the six months ended July 31, 2014, as compared to the same periods of the prior fiscal year. These decreases in gross profit margin were primarily due to the following:
Operating Expenses
Research and Development
The following table provides information regarding the change in research and development expenses during the periods presented:
Research and development expenses
% of total revenue
Research and development expenses consist primarily of employee costs, which include salaries, benefits and related payroll taxes, depreciation of development and test equipment and an allocation of related facility expenses. During the three and six months ended July 31, 2014, research and development costs increased $0.8 million and $2.0 million, respectively, as compared to the same periods of the prior fiscal year, primarily related to our investment in our gateway software product lines.
Selling and Marketing
The following table provides information regarding the change in selling and marketing expenses during the periods presented:
Selling and marketing expenses
Selling and marketing expenses consist primarily of payroll costs, which include salaries and related payroll taxes, benefits and commissions, travel expenses and certain promotional expenses. Selling and marketing expenses decreased $0.1 million, or 3%, in the second quarter of fiscal 2015 and decreased $0.3 million, or 4%, in the first half of fiscal 2015, when compared to the same periods of fiscal 2014 due to a reduction in commissions as a result of lower revenues during these periods.
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General and Administrative
The following table provides information regarding the change in general and administrative expenses during the periods presented:
General and administrative expenses
General and administrative expenses consist primarily of employee costs, which include salaries and related payroll taxes and benefit-related costs, legal and accounting services and an allocation of related facilities expenses. General and administrative expenses decreased $0.5 million, or 11%, in the second quarter of fiscal 2015 and decreased $1.4 million, or 15%, during the first half of fiscal 2015, as compared to the same periods of fiscal 2014, primarily due to lower headcount and lower legal fees.
Amortization of Intangible Assets
The following table provides information regarding the change in amortization of intangible assets expenses during the periods presented:
Amortization of intangible assets.
Amortization expense is primarily related to the costs of acquired intangible assets. Amortization is also based on the future economic value of the related intangible assets which is generally higher in the earlier years of the assets’ lives.
Stock-based Compensation Expense
The following table provides information regarding the change in stock-based compensation expense during the periods presented:
Stock-based compensation expense is related to the issuance of stock grants to our employees, executives and members of our Board of Directors. Stock-based compensation expense increased $0.1 million during the three months ended and decreased $0.4 million during the six months ended July 31, 2014, as compared to the same periods of fiscal 2014.
Professional Fees—Other
The following table provides information regarding the change in professional fees expenses associated with acquisitions, divestitures, litigation and strategic alternatives during the periods presented:
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Professional fees in the second quarter and first half of fiscal 2015 decreased $0.2 million and $0.6 million, respectively, when compared to the same period of fiscal 2014.
Severance and Other Restructuring Costs
The following table provides information regarding the change in severance and other restructuring costs during the periods presented:
Severance and other restructuring costs decreased $0.4 million for the three months ended and $0.2 million for the six months ended July 31, 2014, as compared to the same period of 2013 primarily due to the termination of employees during the periods presented.
Other (Expenses) Income, Net
The table below provides detail regarding our other (expenses) income, net:
Loss on sale of equity investment
Interest income (expense), net
Foreign exchange (loss) gain
Miscellaneous loss
For the six months ended July 31, 2014, other expenses decreased $0.9 million due to a decrease in loss on sale of equity investments and a change in exchange rates between the U.S. Dollar and foreign currencies during the periods presented.
Income Tax Provision (Benefit)
We recorded an income tax provision from continuing operations of $0.2 million for the three months ended July 31, 2014 and an income tax benefit of $0.1 million for the six month period. This benefit for the fiscal year is attributable to foreign losses that can be benefitted.
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Non-GAAP Measures.
We define non-GAAP (loss) income from operations as U.S. GAAP operating (loss) income plus stock-based compensation expenses, amortization of intangible assets, earn-outs and change in fair value of earn-outs, professional fees associated with acquisitions, divestitures, litigation and strategic alternatives and severance and other restructuring costs. We define adjusted EBITDA as U.S. GAAP operating (loss) income before depreciation expense, amortization of intangible assets, stock-based compensation expense, earn-outs and change in fair value of earn-outs, professional fees associated with acquisitions, divestitures, litigation and strategic alternatives, and severance and other restructuring costs. We discuss non-GAAP (loss) income from operations in our quarterly earnings releases and certain other communications as we believe non-GAAP operating (loss) income from operations and adjusted EBITDA are both important measures that are not calculated according to U.S. GAAP. We use non-GAAP (loss) income from operations and adjusted EBITDA in internal forecasts and models when establishing internal operating budgets, supplementing the financial results and forecasts reported to our Board of Directors, determining a component of bonus compensation for executive officers and other key employees based on operating performance and evaluating short-term and long-term operating trends in our operations. We believe that non-GAAP (loss) income from operations and adjusted EBITDA financial measures assist in providing an enhanced understanding of our underlying operational measures to manage the business, to evaluate performance compared to prior periods and the marketplace, and to establish operational goals. We believe that these non-GAAP financial adjustments are useful to investors because they allow investors to evaluate the effectiveness of the methodology and information used by management in our financial and operational decision-making.
Non-GAAP (loss) income from operations and adjusted EBITDA are non-GAAP financial measures and should not be considered in isolation or as a substitute for financial information provided in accordance with U.S. GAAP. These non-GAAP financial measures may not be computed in the same manner as similarly titled measures used by other companies. We expect to continue to incur expenses similar to the financial adjustments described above in arriving at non-GAAP (loss) income from operations and adjusted EBITDA, and investors should not infer from our presentation of this non-GAAP financial measure that these costs are unusual, infrequent or non-recurring.
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The following table includes the reconciliations of our U.S. GAAP (loss) income from operations, the most directly comparable U.S. GAAP financial measure, to our non-GAAP (loss) income from operations and the reconciliation of our U.S. GAAP (loss) income from operations to our adjusted EBITDA for the three and six months ended July 31, 2014 and 2013 (amounts in thousands, except per share and percentage data):
Products
Services
Stock-based compensation
Gross profit percentage
(Loss) income from operations percentage
Operating (loss) income per share:
Adjusted EBITDA:
Loss from operations
Depreciation expense
Earn-outs and changes in fair value
Severance and other restructuring
Adjusted EBITDA
Adjusted EBITDA %
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In managing and reviewing our business performance, we exclude a number of items required by U.S. GAAP. Management believes that excluding these items is useful in understanding the trends and managing our operations. We provide these supplemental non-GAAP measures in order to assist the investment community to see SeaChange through the “eyes of management,” and therefore enhance the understanding of SeaChange’s operating performance. Non-GAAP financial measures should be viewed in addition to, not as an alternative to, our reported results prepared in accordance with U.S. GAAP. Our non-GAAP financial measures reflect adjustments based on the following items:
Amortization of Intangible Assets. We incur amortization expense of intangible assets related to various acquisitions that have been made in recent years. These intangible assets are valued at the time of acquisition, are then amortized over a period of several years after the acquisition and generally cannot be changed or influenced by management after the acquisition. We believe that exclusion of these expenses allows comparisons of operating results that are consistent over time for the Company’s newly-acquired and long-held businesses.
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Stock-based Compensation Expense. We incur expenses related to stock-based compensation included in our U.S. GAAP presentation of cost of revenues, selling and marketing expense, general and administrative expense and research and development expense. Although stock-based compensation is an expense we incur and is viewed as a form of compensation, the expense varies in amount from period to period, and is affected by market forces that are difficult to predict and are not within the control of management, such as the market price and volatility of our shares, risk-free interest rates and the expected term and forfeiture rates of the awards.
Earn-outs and Change in Fair Value of Earn-outs. Earn-outs and the change in the fair value of the earn-outs are considered by management to be non-recurring expenses to the former shareholders of the businesses we acquire. We also incur expense due to changes in fair value related to contingent consideration that we believe would otherwise impair comparability among periods.
Professional Fees—Other. We have excluded the effect of legal and other professional costs associated with our acquisitions, divestitures, litigation and strategic alternatives because the amounts are considered significant non-operating expenses.
Severance and Other Restructuring. We incur charges due to the restructuring of our business, including severance charges and facility reductions resulting from our restructuring and streamlining efforts and any changes due to revised estimates, which we generally would not have otherwise incurred in the periods presented as part of our continuing operations.
Depreciation Expense. We incur depreciation expense related to capital assets purchased to support the ongoing operations of the business. These assets are recorded at cost and are depreciated using the straight-line method over the useful life of the asset. Purchases of such assets may vary significantly from period to period and without any correlation to underlying operating performance. Management believes that exclusion of depreciation expense allows comparisons of operating results that are consistent across past, present and future periods.
Off-Balance Sheet Arrangements
We do not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements. As such, we are not exposed to any financing, liquidity, market or credit risk that could arise if we had engaged in such relationships.
Liquidity and Capital Resources
The following table includes key line items of our consolidated statements of cash flows:
Historically, we have financed our operations and capital expenditures primarily with cash on-hand. Cash, cash equivalents, restricted cash, and marketable securities decreased from $128.1 million at January 31, 2014 to $110.9 million at July 31, 2014.
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Operating Activities
Below are key line items affecting cash from operating activities:
Net loss from continuing operations
Adjustments to reconcile net loss to cash (used in) provided by operating activities from continuing operations
Net (loss) income including adjustments
Decrease in accounts receivable
Decrease (increase) in inventory
(Increase) decrease in prepaid expenses and other current assets
Decrease in accrued expenses
Decrease in deferred revenues
All other—net
We used net cash in continuing operating activities of $9.7 million for the six months ended July 31, 2014. This cash used in operating activities was primarily the result of our net loss, including adjustments, of $8.6 million and a $1.1 million decrease in working capital during fiscal 2015.
Investing Activities
Cash flows from investing activities are as follows:
Net cash used in investing activities from continuing operations.
We used $4.5 million of cash in investing activities from continuing operations primarily related to the purchase of capital assets of $0.7 million, an investment in an affiliate of $2.0 million and a net use of cash of $2.0 million related to the purchases of marketable securities.
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Financing Activities
Cash flows from financing activities are as follows:
Repurchases of our common stock
We used $5.5 million in cash in our financing activities from continuing operations for the purchase of stock under a stock repurchase plan during fiscal 2015.
Effect of exchange rate changes increased cash and cash equivalents by $0.4 million for the six months ended July 31, 2014, due to the translation of European subsidiaries’ cash balances, which use the Euro as their functional currency, to U.S. dollars.
We have a Demand Promissory Note in the aggregate amount of $20.0 million (the “Line of Credit”) with JP Morgan. Borrowings under the Line of Credit will be used to finance working capital needs and for general corporate purposes. The Line of Credit expires on November 27, 2014. We currently do not have any borrowings nor do we have any financial covenants under this line.
We believe that existing funds combined with available borrowings under the line of credit and cash provided by future operating activities are adequate to satisfy our working capital, potential acquisitions and capital expenditure requirements and other contractual obligations for the foreseeable future, including at least the next 12 months. However, if our expectations are incorrect, we may need to raise additional funds to fund our operations, to take advantage of unanticipated strategic opportunities or to strengthen our financial position.
In addition, we actively review potential acquisitions that would complement our existing product offerings, enhance our technical capabilities or expand our marketing and sales presence. Any future transaction of this nature could require potentially significant amounts of capital or could require us to issue our stock and dilute existing stockholders. If adequate funds are not available, or are not available on acceptable terms, we may not be able to take advantage of market opportunities, to develop new products or to otherwise respond to competitive pressures.
Effects of Inflation
Management believes that financial results have not been significantly impacted by inflation and price changes in materials we use in manufacturing our products.
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Contractual Obligations
There have been no significant changes to our contractual obligations since January 31, 2014. Refer to our Form 10-K for the fiscal year ended January 31, 2014 for additional information regarding our contractual obligations.
Critical Accounting Policies and Significant Judgment and Estimates
The accounting and financial reporting policies of SeaChange are in conformity with U.S. GAAP, which requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses and disclosure of contingent assets and liabilities. We evaluate our estimates on an on-going basis, including those related to revenue recognition, allowance for doubtful accounts, acquired intangible assets and goodwill, stock-based compensation, impairment of long-lived assets and accounting for income taxes. Our estimates are based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Actual results may differ from these estimates.
There have been no significant changes in our critical accounting policies during the six months ended July 31, 2014, as compared to those disclosed in our fiscal 2014 Form 10-K.
Recent Accounting Standard Updates
In June 2014, the FASB issued ASU No. 2014-12, “Compensation—Stock Compensation (Topic 718) – Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period.” ASU 2014-12 requires that a performance target which affects vesting and that could be achieved after the requisite service period be treated as a performance condition by applying existing guidance in Topic 718 as it relates to awards with performance conditions. The amendment also specifies the period over which compensation costs should be recognized. The amendment is effective for annual reporting periods and interim periods within those annual periods beginning after December 15, 2015. Early adoption is permitted. We are currently evaluating the impact of the adoption of ASU 2014-12 on our consolidated financial statements.
In April 2014, the FASB issued ASU 2014-08, “Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360) – Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity,” which changes the criteria for reporting discontinued operations while enhancing disclosures in this area. The amended guidance requires that a disposal representing a strategic shift that has (or will have) a major effect on an entity’s financial results or a business activity classified as held for sale should be reported as discontinued operations. This guidance also expands the disclosures required when an entity reports a discontinued operation or when it disposes of or classifies as held for sale an individually significant component that does not meet the definition of a discontinued operation. This new guidance will be effective prospectively on disposals (or classifications of held for sale) of components of an entity that occur within our fiscal years beginning on February 1, 2015. Early adoption is permitted but only for disposals (or classification as held for sale) that have not been reported in financial statements previously issued or available for issuance. We do not
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anticipate material impacts on our financial statements upon initial adoption. This guidance could have a material impact on our disclosure requirements if we dispose of, or classify as held for sale, an individually significant component of our business that does not meet the definition of a discontinued operation.
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk
Foreign Currency Exchange Risk
We face exposure to financial market risks, including adverse movements in foreign currency exchange rates and changes in interest rates. These exposures may change over time as business practices evolve and could have a material adverse impact on our financial results. Our foreign currency exchange exposure is primarily associated with product sales arrangements or settlement of intercompany payables and receivables among subsidiaries and its parent company, and/or investment/equity contingency considerations denominated in the local currency where the functional currency of the foreign subsidiary is the U.S. dollar.
Substantially all of our international product sales are payable in U.S. dollars or in the case of our operations in the Netherlands, payable in local currencies, providing a natural hedge for receipts and local payments. In light of the high proportion of our international businesses, we expect the risk of any adverse movements in foreign currency exchange rates could have an impact on our translated results within the consolidated statements of operations and comprehensive loss and the consolidated balance sheets. For the first six months of fiscal 2015, we generated a foreign currency translation loss of $0.1 million, which decreased the equity section of our consolidated balance sheet over the prior year.
We did not enter into derivative financial instruments for trading purposes and do not currently have outstanding derivative financial instruments related to payment obligations of the Company. While we do not anticipate that near-term changes in exchange rates will have a material impact on our operating results, financial position and liquidity, a sudden and significant change in the value of foreign currencies could harm our operating results, financial position and liquidity.
Our principal currency exposures relate primarily to the U.S. dollar, the Euro and the Philippine peso. All foreign currency gains and losses are included in other (expenses) income, net, in the accompanying consolidated statements of operations and comprehensive (loss) income. For the six months ended July 31, 2014, we recorded approximately $48,000 in losses due to the international subsidiary translations and cash settlements of revenues and expenses.
Interest Rate Risk
Exposure to market risk for changes in interest rates relates primarily to our investment portfolio of marketable debt securities of various issuers, types and maturities and to our borrowings under our demand note payable. We do not use derivative instruments in our investment portfolio, and our investment portfolio only includes highly liquid instruments. Our cash and marketable securities include cash equivalents, which we consider to be investments purchased with original maturities of 90 days or less. There is risk that losses could be incurred if we were to sell any of our securities prior to stated maturity. Given the short maturities and investment grade quality of the portfolio holdings at July 31, 2014, a sharp change in interest rates should not have a material adverse impact on the fair value of our investment portfolio. However, our long term marketable securities, which are carried at the lower of cost or market value, have fixed interest rates, and therefore are subject to changes in fair value.
ITEM 4. Controls and Procedures
Evaluation of disclosure controls and procedures. We evaluated the effectiveness of our disclosure controls and procedures, as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of the end of the period covered by this Form 10-Q. Raghu Rau, our Chief Executive Officer, and Anthony C. Dias, our Chief Financial Officer, reviewed and participated in this evaluation. Based upon that evaluation, Messrs. Rau and Dias concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report and as of the date of the evaluation.
Changes in internal control over financial reporting. As a result of the evaluation completed by us, and in which Messrs. Rau and Dias participated, we have concluded that there were no changes during the fiscal quarter ended July 31, 2014 in our internal control over financial reporting, which have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings
We enter into agreements in the ordinary course of business with customers, resellers, distributors, integrators and suppliers. Most of these agreements require us to defend and/or indemnify the other party against intellectual property infringement claims brought by a third party with respect to our products. From time to time, we also indemnify customers and business partners for damages, losses and liabilities they may suffer or incur relating to personal injury, personal property damage, product liability, and environmental claims relating to the use of our products and services or resulting from the acts or omissions of us, our employees, authorized agents or subcontractors. Management cannot reasonably estimate any potential losses, but these claims could result in material liability for us.
ITEM 1A. Risk Factors
In addition to the other information set forth in this Form 10-Q, you should carefully consider the risk factors discussed in Part I, “Item 1A. Risk Factors” in our Form 10-K for the fiscal year ended January 31, 2014, which could materially affect our business, financial condition or future results. The risks described in our Form 10-K are not the only risks that we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or future results.
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds
Stock Repurchase Program
On September 4, 2013, our Board of Directors authorized the repurchase of up to $25.0 million of our common stock, par value $0.01 per share, through a share repurchase program which would have terminated on January 31, 2015. On May 31, 2014, this program was amended to increase the authorized repurchase amount to $40.0 million and extend the termination date to April 30, 2015. Under the program, management is authorized to repurchase shares through Rule 10b5-1 plans, open market purchases, privately negotiated transactions, block purchases or otherwise in accordance with applicable federal securities laws, including Rule 10b-18 of the Securities Exchange Act of 1934. This share repurchase program does not obligate us to acquire any specific number of shares and may be suspended or discontinued at any time. All repurchases are expected to be funded from our current cash and investment balances. The timing and amount of shares to be repurchased will be based on market conditions and other factors, including price, corporate and regulatory requirements, and alternative investment opportunities. Any shares repurchased by us under the share repurchase program will reduce the number of shares outstanding. Pursuant to the share repurchase program, we executed a Rule 10b5-1 plan commencing in June 2014 to repurchase shares.
The following table provides information about our repurchases of our equity securities during the quarter ended July 31, 2014:
Period
May 1, 2014 to May 31, 2014
June 1, 2014 to June 30, 2014
July 1, 2014 to July 31, 2014
ITEM 6. Exhibits
See the Exhibit Index following the signature page to this Form 10-Q.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, SeaChange International, Inc. has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Dated: September 5, 2014
by:
Chief Financial Officer,
Senior Vice President, Finance and
Administration and Treasurer
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Index to Exhibits
No.
Description
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