Avid 2005 Annual Report Download - page 87

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M. SEGMENT INFORMATION
The Company’s organizational structure is based on strategic business units that offer various products to the principal markets in
which the Company’s products are sold. In SFAS No. 131, “Disclosures about Segments of an Enterprise and Related Information”,
operating segments are defined as components of an enterprise about which separate financial information is available that is
evaluated regularly by the chief operating decision maker, or decision-making group, in deciding how to allocate resources and in
assessing performance. The Company evaluated the discrete financial information that is regularly reviewed by the chief operating
decision-makers and determined that these business units equate to three reportable segments: Professional Film, Video and
Broadcast (“Professional Video”); Audio; and Consumer Video.
The Professional Video segment produces non-linear video and film editing systems to improve the productivity of video and
film editors and broadcasters by enabling them to edit video, film and sound in a faster, easier, more creative and more cost-
effective manner than by use of traditional analog tape-based systems. The products in this operating segment are designed to
provide capabilities for editing and finishing feature films, television shows, broadcast news programs, commercials, music videos,
and corporate and government videos. This segment includes the Media Composer family of products, which accounted for
approximately 12%, 17% and 16% of the Company’s consolidated net revenues in 2005, 2004 and 2003, respectively. Also within
this segment are Shared Storage products that provide complete network, storage and database solutions based on the Company’s
Avid Unity MediaNetwork technology, and enable users to simultaneously share and manage media assets throughout a project
or organization. This product family accounted for 10%, 12% and 12% of the Company’s consolidated net revenues in 2005, 2004
and 2003, respectively. The Audio segment produces digital audio systems for the audio market. This operating segment includes
products developed to provide audio recording, editing, signal processing and automated mixing. This segment includes the
Pro Tools product family, which accounted for approximately 18%, 24% and 25% of the Company’s consolidated net revenues in
2005, 2004 and 2003, respectively. The Consumer Video segment develops and markets products that are aimed primarily at the
consumer market, which allow users to create, edit, view and distribute rich media content including video, photographs and audio
using a personal computer. This segment was formed in August 2005 and is comprised of certain product lines acquired in the
Pinnacle acquisition (see Note F).
The accounting policies of each of the segments are the same as those described in the summary of significant accounting policies
(see Note B). The Company evaluates performance based on profit and loss from operations before income taxes, interest income,
interest expenses and other income, excluding the effects of restructuring and other costs, amortization or impairment of intangible
assets associated with acquisitions and stock-based compensation. Common costs not directly attributable to a particular segment
are allocated between segments based on management’s best estimates.
The following is a summary of the Company’s operations by reportable segment (in thousands):
For the Year Ended December 31,
2005 2004 2003
Professional Film, Video and Broadcast:
Net revenues $448,288 $391,143 $330,859
Depreciation 13,473 9,529 8,419
Operating income 52,735 46,153 28,357
Assets at December 31, 179,027 142,105 111,682
Capital expenditures 14,740 12,477 7,195
Audio:
Net revenues $268,058 $198,462 $141,053
Depreciation 2,860 2,502 2,484
Operating income 38,599 29,251 15,718
Assets at December 31, 88,437 66,023 34,978
Capital expenditures 2,786 2,700 756