Pinnacle Systems Reports Record Quarterly Revenue and Net Income

Business Wire, Jan 14, 1999

MOUNTAIN VIEW, Calif.--(BUSINESS WIRE)--Jan. 14, 1999--Pinnacle Systems, Inc. (NASDAQ:PCLE) today announced financial results for the second quarter of fiscal 1999, which ended December 31, 1998.

Net sales were a record $39,172,000 compared to $27,881,000 in the second quarter of fiscal 1998. Net income for the second quarter of fiscal 1999 was $5,041,000 or $.44 per share on a diluted basis, compared to net income of $2,453,000, or $.26 per share, in the second quarter of fiscal 1998. In addition, the company generated positive cash flow during the second quarter of fiscal 1999 and ended with $96.4 million in cash and marketable securities.

According to Pinnacle Systems' President and Chief Executive Officer, Mark Sanders, "The second quarter of fiscal 1999 was a stellar quarter with record sales for the sixth consecutive quarter, record net income, and positive cash flow which added to our already strong balance sheet. Net sales increased 40% and net income more than doubled over the same quarter last fiscal year, with growth coming from increased sales of both desktop and consumer products."

The second quarter of fiscal 1999 was the first full quarter for shipments of FXDeko(tm) for the broadcast market and ReelTime(tm) NITRO for the desktop market. In addition, the company commenced shipment of Studio DC10plus and announced Studio MP10, two new additions to the Studio line of consumer products.

Also during the quarter Pinnacle Systems entered into a definitive agreement to acquire Truevision, Inc. (NASDAQ: TRUV), a leading supplier of digital video products, in a transaction designed to extend Pinnacle Systems' leadership in the desktop digital video capture and editing market. " We are very excited about merging these two companies", said Sanders, "and we believe this transaction will strengthen Pinnacle's leadership position in the desktop video arena, as well as further advance our efforts in high definition video (HDTV) tools development. Truevision's product lines compliment Pinnacle's well, and together we will serve a far wider array of customers and applications in the digital video editing market. Importantly, Truevision enjoys strategic relationships with several key partners, including Avid (NASDAQ: AVID), Discreet Logic (NASDAQ: DSLGF), and Panasonic."

About Pinnacle's Systems Newest Products:

FXDeko is Pinnacle Systems' newest broadcast product which combines the Company's sophisticated Windows(R) NT(R) based Deko character generator (CG) with proprietary 3D real-time effects technology. ReelTime NITRO is a powerful non-linear editing system that combines dual stream video capture and editing capabilities with Pinnacle Systems' real-time 3D digital video effects technology. Studio DC10plus allows hobbyists to capture and edit videos right at their desktops, and is an ideal tool for creating short form subjects such as music videos, family skits, corporate presentations and even Internet v-mails. Studio MP10 allows users to capture MPEG-1 compressed video combined with audio, edit it, and copy the finished program to an MPEG-1 file or to a VHS tape.

About Pinnacle Systems, Inc.

Pinnacle Systems' broadcast, desktop, and consumer products provide video professionals and consumers cutting-edge digital video product tools to create quality video programs faster and more affordably than ever before. Pinnacle Systems may be reached at (650) 526-1600 or on the World Wide Web at www.pinnaclesys.com.

All trademarks and registered trademarks are the property of their respective owners and are used for identification or reference purposes only, with no intent to infringe on copyrights. -0-

                 Pinnacle Systems, Inc. and Subsidiary
                 Consolidated Statements of Operations
                 (In thousands, except per share data)

                                   Three                Six
                                Months Ended        Months Ended
                                December 31,        December 31,
                               1998      1997      1998      1997

Net sales                    $ 39,172  $ 27,881  $ 71,445  $ 44,395
Cost of sales                  18,196    13,117    33,210    20,853
 Gross profit                  20,976    14,764    38,235    23,542

Operating expenses:
 Engineering and product
  development                   3,352     2,918     6,653     4,990
 Sales and marketing           10,563     8,164    19,149    13,385
 General and administrative     1,885     1,132     3,394     2,403
 In process research and
  development                      --        --        --    16,960

 Total operating expenses      15,800    12,214    29,196    37,738

 Operating income (loss)        5,176     2,550     9,039   (14,196)

Interest income, net            1,129       516     2,275     1,068

 Income (loss) before
  income taxes                  6,305     3,066    11,314   (13,128)

Income tax expense             (1,264)     (613)   (2,266)     (766)

 Net income (loss)           $  5,041  $  2,453  $  9,048  $(13,894)

Net income (loss) per share
 Basic                       $   0.48  $   0.29  $   0.87  $  (1.75)
 Diluted                     $   0.44  $   0.26  $   0.80  $  (1.75)

Shares used to compute
net income (loss) per share
 Basic                         10,524     8,464    10,363     7,942
 Diluted                       11,492     9,323    11,298     7,942


                Pinnacle Systems, Inc. and Subsidiaries
                      Consolidated Balance Sheets
                            (In Thousands)

                                       December 31,    June 30,
                                           1998          1998
Assets

Current assets:
 Cash and equivalents                   $  24,451     $  47,478
 Marketable securities                     64,666        39,307
 Accounts receivable, net                  23,790        18,459
 Inventories                               18,260        11,960
 Prepaid expenses & others                  2,854         1,674
    Total current assets                  134,021       118,878

Marketable securities                       7,239         4,521
Property and equipment, net                 7,198         5,411
Goodwill                                   10,391         3,390
Other assets                                  638           737
                                        ---------     ---------
                                        $ 159,487     $ 132,937

Liabilities and Shareholders' Equity

Current liabilities:
 Accounts payable                       $  11,704     $   8,143
 Accrued expenses & other                  13,253        10,239
   Total current liabilities               24,957        18,382

Long-term obligations                          --           163
   Total liabilities                       24,957        18,545

Shareholders' equity:
 Common stock                             143,631       133,332
 Accumulated deficit                       (9,777)      (18,825)
 Other cumulative comprehensive loss          676          (115)
    Total shareholders' equity            134,530       114,392
                                        ---------     ---------
                                        $ 159,487     $ 132,937