Avid 1997 Annual Report Download

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1997 annual report
Avid Technology, Inc.

Table of contents

  • Page 1
    19 97 a n n u a l report Avid Technology, Inc. 

  • Page 2
    ... H.R. + Corporate Services; Dave Froker, Sr. VP + GM, Digidesign; Jean Proulx, Sr. VP + GM, Professional Products; David Olson, Sr. VP + GM, Digital News Prouction; Cliff Jenks, Exec. VP + GM, Editing + Effects; Bill Flaherty, Sr. VP , Finance + CFO; Bill Miller, CEO + Chairman of the Board; seated...

  • Page 3
    ... product cost; we transformed our customer support operation and distribution channels; and we delivered an array of powerful new products such as Media Composer 7.0 and Pro Tools 24. These and a thousand other successes, large and small, combined to bring Avid back to health. The results reported...

  • Page 4
    ..., from presentation video to corporate communications and training, to personal communication and entertainment. In a world in which media can be used for virtually any message and delivered across the airwaves, a cable or a computer network, we intend to continue to provide the tools that people...

  • Page 5
    ... costs and the Company's decision not to release a product line. The 1995 and 1993 charges related to merger costs and the purchase of incomplete technology, respectively. 93 94 95 96 97 net income (loss) Balance Sheet Highlights year ended December 31, $ in thousands (except per share data...

  • Page 6
    ...of technological possibilities. We're proud to be setting the standard with award-winning digital editing solutions for film, video, audio and creating graphics + effects. I n n ov a t i o n As we've grown, we've never lost sight of our goal-to give our customers worldwide the most innovative tools...

  • Page 7
    ...Common Stock $.01 Par Value (Title of Class) 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 such shorter period that the registrant was required to file such...

  • Page 8
    ... stations; recording studios; advertising agencies; government and educational institutions; and corporate video departments. In January 1995, Avid effected a merger with Digidesign, Inc. ("Digidesign"). Digidesign is a leading provider of computerbased, digital audio production systems for the...

  • Page 9
    ... of digital media content to their customers and employees. Educational users and home consumers use content creation tools to enrich school and home presentations. Avid's digital news production market is comprised of over-the-air and cable broadcast companies that originate news programming...

  • Page 10
    ... third-party Windows applications, a built-in titling tool, and a plug-in effects architecture. Avid Cinema: Avid Cinema is a desktop editing product designed for people who have had no previous video editing experience. Avid Cinema is targeted at users in home, school, and corporate environments...

  • Page 11
    ... computer-based library of video and audio media files. Based on the Silicon Graphics family of servers, Avid MediaServer supports multiple editing and/or playback workstations. The Avid MediaServer system is designed to allow television broadcasters to capture electronic news feeds, edit stories...

  • Page 12
    ... dialogue replacement), and commercial spot production. AudioVision allows the user to record, edit and process sound in sync with Avid-format digital video. AudioVision includes project management and database tools, integrated DSP and the ability to edit audio and video together. The system offers...

  • Page 13
    ... tools that operate on Windows-based computers, Apple computers, and Unix-based computers; 2) the development of hardware and software enhancements and additions to its existing video, film and audio editing systems, and digital news gathering and newsroom computer systems that lower Avid's costs...

  • Page 14
    ...500) digital audio playback cards targeted primarily at the personal computer game market. There can be no assurance that these companies will not introduce products that are more directly competitive with the Company's products. In the market for graphics and special effects products, Avid competes...

  • Page 15
    ... complaints include claims that the defendants violated federal securities laws and state common law by allegedly making false and misleading statements and by allegedly failing to disclose material information that was required to be disclosed, purportedly causing the value of the Company's stock...

  • Page 16
    ... and General Manager of Editing and Effects Senior Vice President of Technical Strategies Senior Vice President and General Manager, Digital News Production Senior Vice President of Human Resources and Corporate Services Senior Vice President and Chief Technology Officer Senior Vice President...

  • Page 17
    ... President and General Manager, Digital News Production since November 1997. Mr. Olson was Senior Vice President of Worldwide Operations of the Company and Chief Operating Officer of Digidesign from January 1997 to November 1997. He was Vice President of Worldwide Operations for Avid from June 1996...

  • Page 18
    ... accounted for as a pooling of interests. All financial data presented herein have been restated to include the combined financial results of Avid and Digidesign as though the merger had occurred retroactively. Prior to the merger, Digidesign had a March 31 fiscal year end. Effective with the merger...

  • Page 19
    ... revenues Cost of revenues Gross profit Operating expenses: Research and development Marketing and selling General and administrative Nonrecurring costs ... - diluted Weighted average common shares outstanding - basic Weighted average common shares outstanding - diluted Earnings per share data have ...

  • Page 20
    ..., video and audio editing and special effects software and hardware technologies to create media content for information and entertainment applications. Integrated with the Company's digital storage and networking solutions, Avid's products are used worldwide in film studios; video production and...

  • Page 21
    ...reflects the effects of upgrading Media Composer systems for use on PCI-based computers and an increase in manufacturing overhead associated with higher facility, information system and customer support costs allocated to costs of revenues. In addition, the Company's decrease in gross margin in 1996...

  • Page 22
    ... increased from the 1995 amount due to the spin-out of certain technologies which resulted in equity income, a gain on sale of a product line, and royalties received during the year. Provision for (Benefit from) Income Taxes The Company's effective tax rate was 31%, 32%, and 36%, respectively, for...

  • Page 23
    ... of products sold, cost and the proportion of third-party hardware included in the systems sold by the Company, the distribution channels through which products are sold, the timing of new product introductions, the offering of product and platform upgrades, price discounts and other sales promotion...

  • Page 24
    ... on selling prices of products. The Company's systems and software products typically have higher gross margins than storage devices and product upgrades. Gross profit varies from product to product depending primarily on the proportion and cost of third-party hardware included in each product. The...

  • Page 25
    ... interruption in its sources of supply. The markets for digital media editing and production systems are intensely competitive and subject to rapid change. The Company encounters competition in the video and film editing and effects, digital news production, and professional audio markets. Many...

  • Page 26
    ... planned replacement or upgrades. In addition, the Company expects that any costs incurred to modify its internal systems will not be material. Although management does not expect Year 2000 issues to have a material impact on its business or future results of operations, there can be no assurance...

  • Page 27
    AVID TECHNOLOGY, INC. ANNUAL REPORT ON FORM 10-K YEAR ENDED DECEMBER 31, 1997 ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY FINANCIAL INFORMATION 20

  • Page 28
    AVID TECHNOLOGY, INC. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Consolidated Financial Statements included in Item 8: Report of Independent Accountants...Consolidated Statements of Operations for the years ended December 31, 1997, 1996 and 1995...Consolidated Balance Sheets as of December 31, 1997...

  • Page 29
    ...accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and...

  • Page 30
    ..., except per share data) For the Year Ended December 31, 1997 1996 1995 $471,338 $429,009 $406,650 221,553 238,808 198,841 249,785 190,201 207,809 Net revenues Cost of revenues Gross profit Operating expenses: Research and development Marketing and selling General and administrative Nonrecurring...

  • Page 31
    ... Prepaid expenses Other current assets Total current assets Marketable securities Property and equipment, net Long-term deferred tax assets Other assets Total assets Liabilities and Stockholders' Equity Current liabilities: Accounts payable Current portion of long-term debt Accrued compensation and...

  • Page 32
    ... data) Common Stock Shares Amount Balances at December 31, 1994 16,545,344 $166 Exercise of stock options and related tax benefits Sale of common stock under Employee Stock Purchase Plan Stock issued in connection with acquisitions Sale of common stock in a public offering, net of issuance costs...

  • Page 33
    Treasury Stock Deferred Compensation Cumulative Translation Adjustment $(578) Net Unrealized Gains (Losses) on Marketable Securities $(206) Total Stockholders Equity $127,887 11,906 1,204 3,235 (122) 250 (700) 44 88,167 (122) 250 15,439 247,966 1,188 2,372 (24) (...

  • Page 34
    ...expenses and other current assets Accounts payable Income taxes payable Accrued expenses Deferred revenues Net cash provided by (used in) operating activities Cash flows from investing activities: Capitalized software development costs Purchases of property, equipment and other assets, net Purchases...

  • Page 35
    ... recording studios; advertising agencies; government and educational institutions; and corporate video departments. The Company's digital editing systems have accounted for the majority of the Company's revenues to date. As described in Note O, in January 1995, Avid effected a merger with Digidesign...

  • Page 36
    ... debts. Warranty Expense The Company provides a warranty reserve at the time of sale for the estimated costs to repair or replace defective hardware products. Research and Development Costs Research and development costs are expensed as incurred except for costs of internally developed or externally...

  • Page 37
    ...data. In October 1997, Statement of Position 97-2, "Software Revenue Recognition" ("SOP 97-2"), was issued which provides guidance on applying generally accepted accounting principles in recognizing revenue on software transactions. SOP 97-2 is effective for transactions entered into in fiscal years...

  • Page 38
    ... (in thousands): Depreciable Life 3 to 5 years 3 to 5 years 3 to 5 years 3 to 10 years December 31, 1997 1996 $75,042 $68,171 4,652 4,233 6,820 6,915 13,105 12,962 99,619 92,281 60,702 43,035 $38,917 $49,246 Computer and video equipment Office equipment Furniture and fixtures Leasehold improvements...

  • Page 39
    ... outstanding borrowings for each loan annually are equal to the Base Rate or LIBOR plus 1.25%, respectively. Additionally, the Company is required to maintain certain financial ratios and is bound by covenants over the life of the agreement, including a restriction on the payment of dividends. The...

  • Page 40
    ... Statutory rate Nondeductible merger costs Tax credits Foreign operations State taxes, net of federal benefit Municipal bond interest Foreign sales corporation Other 2 (32%) Consolidated results of operations include results of manufacturing operations in Ireland. Income from the sale of products...

  • Page 41
    ... Sharing Plan The Company has a profit sharing plan under section 401(k) of the Internal Revenue Code covering substantially all U.S. employees. The 401(k) plan allows employees to make contributions up to a specified percentage of their compensation. The Company may, upon resolution by the Board of...

  • Page 42
    ... outstanding, taking into effect the exchange ratio of 0.79 shares of Avid Common Stock for each share of Digidesign Common Stock. Under the plan, options may be granted to employees, directors, consultants, and advisors to the Company. Incentive stock options may be granted at prices not lower than...

  • Page 43
    ... plans, which are described above. In October 1995, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation", which is effective for periods beginning after December 15, 1995. SFAS No. 123 requires that companies...

  • Page 44
    ...the effects on reported net income (loss) and net income (loss) per share for future years, as the pro forma disclosures include the effects of only those awards granted after January 1, 1995. Information with respect to options granted under all stock option plans is as follows: 1997 Wtd Avg. Price...

  • Page 45
    ... an extended interruption in its source of supply. Accounts Sold with Recourse The Company from time to time sells systems to unrelated financial institutions which lease such systems to end-user customers. In certain of these transactions, the Company accepts varying amounts of recourse from...

  • Page 46
    ... other things, Data Translation has willfully infringed Avid's patent number 5,045,940, entitled "Video/Audio Transmission System and Method." Avid is also seeking an award of treble damages together with prejudgment interest and costs, Avid's costs and reasonable attorneys' fees, and an injunction...

  • Page 47
    becoming the beneficial owner of 30% or more of the Company's common stock, the shareholders approving any plan or proposal for the liquidation or dissolution of the Company, or within a twenty-four month period a majority of the members of the Company's Board of Directors ceasing to continue as ...

  • Page 48
    ... related to merger costs. (2) Sales outside North America included in North American operations were approximately $22,086,000, $22,477,000 and $35,680,000 in 1997, 1996 and 1995, respectively. Transfers between geographic areas are accounted for at prices which, in general, provide a profit after...

  • Page 49
    ... Limited, developers of paint and compositing software, and Elastic Reality, Inc., a developer of special effects software. These transactions, which were accounted for as poolings of interest, were effected through the exchange of approximately 1.5 million shares of the Company's Common Stock...

  • Page 50
    ... to purchase 3,547,356 shares of common stock outstanding during the year ended December 31, 1996 were excluded from the year-todate calculation of diluted net loss per share as the effect of their inclusion would have been anti-dilutive. Earnings per share data have been restated for all periods...

  • Page 51
    ... required to support the Company's business. Earnings per share data have been restated for all periods presented to reflect the adoption of SFAS No. 128. The Company's quarterly operating results fluctuate as a result of a number of factors including, without limitation, the timing of new product...

  • Page 52
    ... this item is contained in the Company's 1998 Proxy Statement under the captions "Election of Directors Directors' Compensation" and "Executive Compensation" and is incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The response to this item is...

  • Page 53
    ... 1998 /s/ James T. Wandrey James T. Wandrey Vice President and Corporate Controller (Principal Accounting Officer) Date: March 26, 1998 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in...

  • Page 54
    47

  • Page 55
    ... to replace traditional tape-based editing with Avid's server-based Digital News Gathering (DNG) System. '97 | Avid entered into strategic alliances with both Intel® and Matsushita® to support it's development plans. '97 | Walter Murch receives the Best Film Editing Oscar for "The English Patient...

  • Page 56
    ... Shareholder inquiries | Inquiries relating to the Company, its activities or its securities should be addressed to: Cheryl A. Reault Director of Investor Relations Avid Technology, Inc. One Park West Tewksbury, MA 01876 tel 978 640 3033 fax 978 640 1366 email [email protected] website...

  • Page 57
    ... and General Manager of Digital News Production Judith M. Oppenheim Senior Vice President of Human Resources and Corporate Services Eric C. Peters Senior Vice President and Chief Technology Officer Jean Proulx Senior Vice President and General Manager of Professional Products James T. Wandrey Vice...

  • Page 58
     Avid Technology, Inc. One Park West Tewksbury, MA 01876 tel 978 640 6789 website www.avid.com tools for storytellers ™ 1174-AR-98