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
September 16, 2003
_________________________________
(Date of earliest event reported)
LIBERATE TECHNOLOGIES
______________________________________________________
(Exact name of Registrant as specified in its charter)
Delaware 000-26565 94-3245315
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(State of Incorporation) (Commission File No.) (IRS Employer
Identification No.)
2 Circle Way, San Carlos, California 94070-6200
____________________________________________________________
(Address of principal executive offices, including zip code)
(650) 701-4000
____________________________________________________
(Registrant's telephone number, including area code)
_____________________________________________________________
(Former name or former address, if changed since last report)
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(c) Exhibits.
99.1 Press Release, dated September 16, 2003, issued by Liberate
Technologies.
ITEM 12. RESULTS OF OPERATIONS AND FINANCIAL CONDITION
On September 16, 2003, Liberate Technologies issued a press release
announcing fiscal year 2003 and restated fiscal year 2002 financial results. The
text of the press release is furnished as Exhibit 99.1 to this Form 8-K.
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned, thereto duly authorized.
LIBERATE TECHNOLOGIES
By: /s/ Kent Walker
_________________________________
Name: Kent Walker
Title: Executive Vice President and
General Counsel
Date: September 16, 2003
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
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99.1 Press release, dated September 16, 2003, issued
by Liberate Technologies.
[GRAPHIC LOGO OMITTED]
EXHIBIT 99.1
FOR IMMEDIATE RELEASE
Contacts:
Greg Wood Kent Walker
Chief Financial Officer General Counsel
Liberate Technologies Liberate Technologies
(650) 701-4080 (650) 701-4077
gwood@liberate.com kwalker@liberate.com
LIBERATE ANNOUNCES FY 2003 AND RESTATED FY 2002 FINANCIAL RESULTS
Company Purchases Supplemental Insurance For Shareholder Litigation;
Announces Expected Sale of OSS Division
Conference Call September 16, 2003, at 2:00 p.m. Pacific Daylight Time
SAN CARLOS, Calif., September 16, 2003 -- Liberate Technologies (Pink Sheets:
LBRT), a leading provider of software for digital cable systems, announced
financial results for its 2003 fiscal year ended May 31, 2003 and completed its
previously announced restatement of its 2002 fiscal year financial results. In
addition, Liberate announced that it has purchased supplemental insurance for
potential liability and defense costs related to the restatement and that it
expects to enter into an agreement to sell its OSS division.
"We have restructured our company, completed the restatement of financial
results, and put in place insurance for the pending shareholder litigation,"
said David Lockwood, Liberate's Chairman and CEO. "We are now executing on our
business plan to establish Liberate as the leading provider of software for
digital cable systems."
"Our software allows cable operators to run multiple services on multiple
platforms," said Mr. Lockwood. "Based on industry standards, our software
enables the delivery of a suite of integrated services, including
High-Definition Television, Video on Demand, and Personal Video Recorders, to a
range of set-top box platforms."
Fiscal 2003 Results
Liberate's revenues for its 2003 fiscal year were $27.7 million, compared to
$70.5 million for the prior fiscal year. The net loss was $399.3 million,
compared to $335.1 million for the prior year.
Revenues fell during fiscal 2003 primarily due to a slowdown in deployments by
European cable operators, reduced realization of deferred revenues from North
American customers, and reduced service revenues. Liberate's deferred revenue
balance decreased $28.7 million in fiscal 2002 and $10.4 million in fiscal 2003.
Operating expenses declined for fiscal 2003 due to reduced staffing in the
second half of the year, although these savings were partially offset by an
increase in expenses related to the restatement.
As of May 31, 2003, Liberate had cash and short-term investments of $261.7
million, plus an additional $9.2 million held as security for office leases. Net
operating loss carry-forwards available to offset future taxable income are
approximately $500 million, and will expire at various dates between 2005 and
2023.
Restatement of Prior Period Results
Liberate also announced that its audit committee has completed its review of the
company's prior period financial statements. As a result of that review,
Liberate restated its financial statements for the second, third, and fourth
quarters of its 2002 fiscal year, and revised its financial results for the
first quarter of its 2003 fiscal year, which had been previously announced in a
press release. The total revenue adjustment for these periods was $10.8 million,
of which $6.8 million was deferred to later periods. Following the restatement
and revision, total revenues for fiscal 2002 were $70.5 million, rather than the
originally reported $80.3 million, and total revenues for the first quarter of
fiscal 2003 were $9.4 million before the effects of discontinued operations,
rather than the originally announced $10.3 million. The attached financial
statements and Liberate's new and amended SEC reports filed today provide
additional information regarding the restatement.
The principal reason for the restatement of revenues was the failure of certain
employees to communicate material facts relating to commercial transactions to
the employees responsible for revenue recognition.
As a result of the audit committee's investigation, Liberate has also made
personnel changes and adopted additional policies designed to strengthen its
internal controls and procedures.
Purchase of Supplemental Insurance Policy
On August 29, 2003, Liberate purchased a $100 million supplemental loss
mitigation insurance policy from a AAA/A++ rated insurance carrier to cover
liabilities that may arise from pending securities and derivative litigation
related to Liberate's restatement. This policy is in addition to Liberate's
existing policies that provide for up to $15 million of coverage. Liberate paid
a $17.9 million premium for the loss mitigation policy, with a rebate of up to
$4.4 million if an eventual settlement or judgment is less than specified
amounts.
Expected Sale of OSS Division, previously known as Sigma Systems
Liberate expects in the near future to enter into a definitive agreement for the
sale of its OSS division, previously known as Sigma Systems. Acquired by
Liberate in August of last year, the OSS division provides software for the
provisioning and management of high-speed data and telephony services over
digital cable networks. The OSS division is based in Toronto, Ontario, employs
approximately 100 professionals, and had net assets of approximately $1.1
million as of May 31, 2003. Revenues for the OSS division following the
acquisition were approximately $2.3 million in Liberate's 2003 fiscal year.
Following a sale of the OSS division and the completion of certain transitional
assignments, Liberate expects to reach a target headcount of approximately 150
full-time professionals by the end of the current calendar year.
Preliminary First Quarter 2004 Revenues
Liberate expects that its revenues for the first quarter of its 2004 fiscal
year, ended August 31, 2003, will decline significantly from the revenues of
$6.6 million reported during the fourth quarter of 2003. This decrease in
revenues reflects the difficult business climate for the cable sector, the lower
realization of deferred revenues, and the classification of the OSS division as
a discontinued operation.
Changes to Liberate's Board of Directors
Christopher Bowick and Dana Evan have resigned from Liberate's board of
directors, effective today. Liberate's board now consists of four independent
directors (Charles Corfield, Patrick Jones, David Nagel, and Robert Walker) and
one management director (David Lockwood).
"Chris and Dana have made important contributions to Liberate over the years.
During the past months, they have played an important role as we completed the
restatement and restructured the company," said Mr. Lockwood. "We thank them for
their service as board members."
Conference Call
Liberate has scheduled a conference call on September 16, 2003, at 2:00 p.m.
Pacific Daylight Time. The call-in number is (212) 346-7479. A replay of the
call will be available until Friday, September 26, 2003 on either (402) 977-9140
or (800) 633-8284, reservation code 21160815. The conference call can also be
accessed via live webcast at Liberate's website (www.liberate.com) and will
remain available for replay.
About Liberate Technologies
Liberate Technologies is a leading provider of software for digital cable
systems. Based on industry standards, Liberate's software enables cable
operators to run multiple services -- including High-Definition Television,
Video on Demand, and Personal Video Recorders -- on multiple platforms.
Headquartered in San Carlos, California, Liberate has offices in Ontario,
Canada, and the United Kingdom. Liberate and the Liberate design are registered
trademarks of Liberate Technologies. Other product names used in association
with these registered trademarks are trademarks of Liberate Technologies.
"Safe Harbor" Statement under the Private Securities Litigation Reform Act of
1995
Those statements above that involve expectations or intentions (such as those
relating to future business or financial performance or anticipated corporate or
commercial activities) are forward-looking statements, not guarantees of future
performance. Actual results may vary materially due to the uncertain market for
interactive television services, dependence on a limited number of cable network
operators, business disruption resulting from Liberate's restatement and related
litigation, necessary adjustments related to recent restructuring, and other
risks outlined in Liberate's filings with the Securities and Exchange Commission
(including its most recent reports on Forms 10-K and 10-Q).
LIBERATE TECHNOLOGIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
May 31,
--------------------------
2002 2003
(As restated)
--------------------------
Assets
Current assets:
Cash & cash equivalents $ 111,396 $ 261,689
Short-term investments 106,228 -
Accounts receivable, net of allowance of doubtful
accounts of $550 and $569, as of May 31, 2002
and 2003, respectively 12,975 4,881
Receivable from affiliate 174 -
Prepaid expenses and other current assets 6,979 3,866
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Total current assets 237,752 270,436
Property and equipment, net 14,500 6,844
Goodwill and intangible assets, net 210,981 3,333
Long-term investments 183,409 -
Deferred costs 22,791 14,449
Restricted cash 9,199 9,249
Notes receivable from officers 1,618 -
Other 691 657
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Total assets $ 680,941 $ 304,968
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Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 2,641 $ 2,228
Accrued liabilities 13,720 39,819
Accrued payroll and related expenses 5,073 1,761
Current portion of capital leases 296 6
Deferred revenues 25,471 15,072
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Total current liabilities 47,201 58,886
Long-term capital leases, net of current portion 10 -
Long-term excess facilities charges 5,828 22,330
Other long-term liabilities 1,883 2,242
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Total liabilities 54,922 83,458
Commitments and contingencies - -
Stockholders' equity:
Preferred stock, $0.01 par value; Authorized - 20,000,000 shares;
Outstanding - none as of May 31, 2002 and 2003 - -
Common stock, $0.01 par value; Authorized - 200,000,000 shares;
Outstanding - 107,583,119 shares as of May 31, 2002 and
104,006,079 shares as of May 31, 2003 1,076 1,040
Contributed and paid in capital 1,497,596 1,490,125
Deferred stock-based compensation (1,163) (194)
Accumulated other comprehensive income 518 1,804
Accumulated deficit (872,008) (1,271,265)
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Total stockholders' equity 626,019 221,510
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Total liabilities and stockholders' equity $ 680,941 $ 304,968
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LIBERATE TECHNOLOGIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
FY02 FY03
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Restatement
As Reported Adjustments As Restated
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Revenues:
License and royalty $ 37,801 $(5,550) $ 32,251 $ 7,626
Service 42,522 (4,310) 38,212 20,090
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Total revenues 80,323 (9,860) 70,463 27,716
Cost of revenues:
License and royalty 2,091 - 2,091 1,409
Service 39,768 646 40,414 26,380
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Total cost of revenues 41,859 646 42,505 27,789
Gross margin 38,464 (10,506) 27,958 (73)
Operating expenses:
Research and development 44,809 (229) 44,580 33,237
Sales and marketing 26,137 - 26,137 19,259
General and administrative 12,484 - 12,484 45,723
Goodwill and intangible asset impairment - - - 37,125
Excess facilities charges and related asset impairment 9,903 1 9,904 25,094
Restructuring costs 3,075 - 3,075 9,193
Amortization of deferred costs related to warrants 12,047 - 12,047 3,837
Amortization of goodwill and intangible assets 220,741 1 220,742 3,571
Amortization of deferred stock-based compensation 1,670 (1) 1,669 1,302
Write-off of acquired in-process research and development - - - 300
Warrant-related asset impairment 44,840 - 44,840 -
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Total operating expenses 375,706 (228) 375,478 178,641
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Loss from operations (337,242) (10,278) (347,520) (178,714)
Interest income 15,968 - 15,968 7,003
Other expense, net (2,799) 1 (2,798) (14,435)
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Loss from continuing operations
before income tax provision (324,073) (10,277) (334,350) (186,146)
Income tax provision 938 (201) 737 1,560
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Loss from continuing operations (325,011) (10,076) (335,087) (187,706)
Loss from discontinued operations - - - (2,262)
Cumulative effect of a change in accounting principle - - - (209,289)
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Net loss $(325,011) $ (10,076) $(335,087) $(399,257)
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Basic and diluted net loss per share:
Continuing operations $ (3.06) $ (0.10) $ (3.16) $ (1.80)
======================================== ==========
Discontinued operations $ - $ - $ - $ (0.02)
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Cumulative effect of change in accounting principle $ - $ - $ - $ (2.00)
======================================== ==========
Basic and diluted net loss per share $ (3.06) $ (0.10) $ (3.16) $ (3.82)
======================================== ==========
Shares used in computing basic and diluted net loss per share 106,144 - 106,144 104,500
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LIBERATE TECHNOLOGIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands)
Unaudited
Quarter ended
August 31, Nov 30, Feb 28, May 31,
2002 2002 2003 2003 FY03
------------ --------- --------- --------- ----------
Revenues:
License and royalty $ 1,109 $ 2,569 $ 2,078 $ 1,870 $ 7,626
Service 8,111 3,751 3,501 4,727 20,090
------------ --------- --------- --------- ----------
Total revenues 9,220 6,320 5,579 6,597 27,716
Cost of revenues:
License and royalty 432 421 257 299 1,409
Service 11,279 6,931 4,744 3,426 26,380
------------ --------- --------- --------- ----------
Total cost of revenues 11,711 7,352 5,001 3,725 27,789
Gross margin:
Gross margin (2,491) (1,032) 578 2,872 (73)
Operating expenses:
Research and development 8,677 10,612 7,494 6,454 33,237
Sales and marketing 5,877 6,252 4,345 2,785 19,259
General and administrative 3,711 5,461 5,945 30,606 45,723
Goodwill and intangible asset impairment 66 - - 37,059 37,125
Excess facilities charges and related asset impairment 17,090 (587) (127) 8,718 25,094
Restructuring costs 2,036 22 4,964 2,171 9,193
Amortization of deferred costs related to warrants 941 1,006 841 1,049 3,837
Amortization of goodwill and intangible assets 756 1,216 1,216 383 3,571
Amortization of deferred stock-based compensation 411 352 254 285 1,302
Write-off of acquired in-process research and development 300 - - - 300
------------ --------- --------- --------- ----------
Total operating expenses 39,865 24,334 24,932 89,510 178,641
------------ --------- --------- --------- ----------
Loss from operations (42,356) (25,366) (24,354) (86,638) (178,714)
Interest income 2,502 2,001 1,442 1,058 7,003
Other income (expense), net 254 (7,150) (2,727) (4,812) (14,435)
------------ --------- --------- --------- ----------
Loss from continuing operations before income
tax provision (39,600) (30,515) (25,639) (90,392) (186,146)
Income tax provision 398 407 238 517 1,560
------------ --------- --------- --------- ----------
Loss from continuing operations (39,998) (30,922) (25,877) (90,909) (187,706)
Loss from discontinued operations (25) (690) (206) (1,341) (2,262)
Cumulative effect of a change in accounting principle (209,289) - - - (209,289)
------------ --------- --------- --------- ----------
Net loss $ (249,312) $(31,612) $ (26,083) $ (92,250) $ (399,257)
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