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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): August 5, 2004
LOUDEYE CORP.
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(Exact name of Registrant as specified in its charter)
Delaware 0-29583 91-1908833
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(State or other jurisdiction (Commission File (I.R.S. Employer
incorporation or of Number) Identification No.)
organization)
1130 Rainier Avenue South
Seattle, Washington 98144
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(Address of principal executive offices) (Zip code)
(206) 832-4000
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(Registrant's telephone number, including area code)
Not Applicable
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(Former Name or Former Address, if Changed Since Last Report)
TABLE OF CONTENTS
ITEM 12. Disclosure of Results of Operations and Financial Condition
SIGNATURES
INDEX TO EXHIBITS
EXHIBIT 99.1
ITEM 12. Disclosure of Results of Operations and Financial Condition
On August 5, 2004 Loudeye Corp. issued a press release announcing its financial
results for the quarter ended June 30, 2004 and conducted a webcast to discuss
those results. A copy of the press release is furnished as Exhibit 99.1.
The press release and webcast contain financial metrics that are not based on
accounting principals generally accepted in the United States ("GAAP"). To
supplement our consolidated financial statements presented on a GAAP basis, we
have included non-GAAP "pro forma" measures of operating results which excludes
certain charges and credits. The pro-forma net loss and pro forma net loss per
share presented in the press release and webcast exclude charges for
amortization of intangible and other assets, depreciation expenses, charges
related to stock-based compensation, loss on the sale of media restoration
assets, net interest income and special charges. Included in the press release
is a reconciliation of the non-GAAP financial measures to our GAAP financial
results. As described further below, we believe the pro forma presentation
enhances an overall understanding of our financial performance, and is used by
management for that purpose.
In response to the prevailing economic conditions as well as emerging
opportunities and trends in the digital media industry, we substantially
restructured our management team and our operations and changed our strategic
direction over the past year. These restructuring activities have included
significant reductions in our work force, termination of certain operating
leases for facilities we no longer occupy, and renegotiation of an operating
lease to reduce the space we occupy in another facility. These actions resulted
in charges in the first quarter of 2003 for severance and termination benefits,
lease termination and renegotiation costs, and impairments of long-lived assets,
including goodwill and intangible assets from previous acquisitions. Such
charges are recorded as special charges in our consolidated statements of
operations. At this time, we have completed our restructuring activities and do
not anticipate further special charges related to those restructurings, other
than to adjust our current estimates for lease termination costs to actual
amounts once negotiations are finalized.
We believe that a presentation of our results of operations which excludes these
special charges provides useful information to investors in evaluating our
financial performance,
as these charges were not reflected in the results of the comparable periods in
the current year, and are not necessarily indicative of our ongoing operations
and performance.
In connection with the restructuring, management performed a reassessment of the
carrying value of all of our assets, both tangible and intangible. This resulted
in significant impairments to intangible assets and goodwill in the first
quarter of 2003. The impairment charges are recorded as special charges and
excluded from pro forma results as indicated above. These impairments resulted
in a substantial decrease in the carrying value of intangible assets and,
therefore, in the related amortization expense compared to the prior year
periods. As a result, amortization expense for the first and second quarters of
2004 is substantially lower than the first and second quarters of 2003.
Accordingly, we believe it is appropriate in a pro forma presentation to exclude
amortization expense in comparing our results to the prior year.
In connection with our work force reductions, we granted options to remaining
employees and a consultant to provide an incentive to manage successfully the
transition and future growth of our company. The stock based compensation
expense on a GAAP basis associated with many of these options is impacted by
changes in our stock price. The increase in our stock price since June of 2003
has resulted in a corresponding increase in stock based compensation expense. In
addition, the recognition of stock based compensation for many of these options
is accelerated under GAAP, such that the majority of the expense is recognized
early in the vesting period. As such, we believe that excluding stock based
compensation expense in our pro forma results provides a useful alternative
presentation of our results as it allows for a more meaningful comparison among
periods.
Because management has viewed among its primary purposes accomplishing a
successful restructuring and realignment of the company and strengthening the
balance sheet, management has been evaluating the success of its efforts in part
by reference to financial results that exclude accounting charges which were
necessary components of those efforts. This permits management to compare the
current year period results to prior year periods on terms it considers a better
measurement of the progress of its efforts.
Although management believes the above non-GAAP financial measures enhance
investors' understanding of our business and performance, these non-GAAP
financial measures are inherently limited in that they exclude a variety of
charges and credits that are required to be included in a GAAP presentation, and
do not therefore present the full measure of our recorded costs against our
revenues. Management compensates for these limitations in non-GAAP results by
also evaluating the company's performance based on traditional GAAP financial
measures. Accordingly, investors should consider these pro forma results
together with GAAP results, rather than as an alternative to GAAP basis
financial measures.
99.1 Press release dated August 5, 2004
SIGNATURES
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 hereunto duly authorized.
Loudeye Corp.
Dated: August 5, 2004 By: /s/ Lawrence J. Madden
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Lawrence J. Madden
Executive Vice President and Chief
Financial Officer