Avid 1997 Annual Report Download - page 45

38
K. Commitments and Contingencies
Lease Commitments
The Company leases its office space and certain equipment under non-cancelable operating leases. The future minimum
lease commitments under these non-cancelable leases at December 31, 1997 are as follows (in thousands):
1998 $11,682
1999 10,516
2000 9,722
2001 5,823
2002 5,475
Thereafter 33,472
Total $76,690
The Company's two leases for corporate office space in Tewksbury, Massachusetts, and the lease for the Company’s
Burbank, California sales and support office, expiring June 2010 and January 2007, respectively, contain renewal options
to extend the respective terms of each lease for an additional 60 months.
The accompanying consolidated results of operations reflect rent expense on a straight-line basis over the term of the leases.
Total rent expense under operating leases was approximately $13,321,762, $11,425,000 and $6,818,000 for the years ended
December 31, 1997, 1996 and 1995, respectively.
The total of future minimum rentals to be received under non-cancelable subleases related to the above leases is $2.1
million.
Purchase Commitments
As of December 31, 1997, the Company has entered into two short-term non-cancelable purchase commitments for certain
components used in its normal operations. The purchase commitments covered by these agreements aggregate
approximately $5,958,000.
The Company currently buys certain key components used in its products from sole source suppliers. These components
are purchased through purchase orders placed from time to time. The Company generally does not carry significant
inventories of these sole source components and has no guaranteed supply arrangements for them. These purchasing
arrangements can result in delays in obtaining products from time to time. While the Company believes that alternative
sources of supply for its sole source components could be developed, its business and results of operations could be
adversely affected if it were to encounter 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 such unrelated third-
party lessors. At December 31, 1997 and 1996, the third-party lessors’ uncollected balance of lease receivables with
recourse totaled approximately $57,977,000 and $22,565,000, respectively with approximately $15,428,000 and
$7,964,000, respectively of associated recourse to Avid. Included in the Company’s accrued expenses are provisions for
estimated losses under such recourse agreements. To date, the Company has experienced no significant write-offs or returns
under such recourse agreements.
Research and Development Contracts
During 1995, the Company entered into research and development contracts with third parties under which it received
$4,300,000 to be used in the development of certain specified products. The Company granted to such third parties, among
other things, discounted pricing on the products developed. Approximately $2,900,000 was recorded as a reduction of the
related development costs during 1995. At December 31, 1995, $1,400,000 was included in accrued expenses due to the
status of related product development and other terms of the underlying contracts. During 1996, that accrued amount was
substantially utilized for related contract obligations.
Contingencies
On June 7, 1995, the Company filed a patent infringement complaint in the United States District Court for the District of
Massachusetts against Data Translation, Inc., a Marlboro, Massachusetts-based company. Avid is seeking judgment against