Avid 2014 Annual Report Download - page 25

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In addition, we source and manufacture many of our products in China and our costs may increase should the renminbi not remain
stable with the U.S. dollar. Although the renminbi is pegged against a basket of currencies determined by the People’s Bank of
China, the renminbi may appreciate or depreciate significantly in value against the U.S. dollar in the long term. In addition, if
China were to permit the renminbi to float to a free market rate of exchange, it is widely anticipated that the renminbi would
appreciate significantly in value against U.S. dollar. An increase in the value of the renminbi against the U.S. dollar would have
the effect of increasing the labor and production costs of our Chinese manufacturers in U.S. dollar terms, which may result in their
passing such costs to us in the form of increased pricing, which would adversely affect our profit margins if we could not pass
those price increases along to our customers.
Our debt obligations may limit our ability to pursue investment opportunities and respond to business needs and
economic and industry condition.
In October 2010, we entered into four-year secured revolving credit facilities in the aggregate principal amount of up to
$60 million. On August 29, 2014, we extended the original maturity date of our revolving credit facilities from October 1, 2014
to October 1, 2015. The amount we are actually entitled to borrow at any time is limited by a formula in the agreement and may
be less than $60 million. Any indebtedness we incur under current or future credit facilities could have negative consequences,
including, increasing our vulnerability to adverse economic and industry conditions; limiting our ability to obtain additional
financing; limiting our ability to complete a merger or an acquisition; and limiting our flexibility in planning for, or reacting to,
changes in our business.
If we are unable to satisfy our obligations under our credit agreement, our liquidity and ability to operate our business
could be adversely affected.
Our ability to satisfy our obligations under our current or future credit facilities will depend on our future operating performance
and on economic, financial, competitive and other factors beyond our control. Our business may not generate sufficient cash
flows to meet these obligations or to successfully execute our business strategy. If we are unable to meet our obligations under
our current or future credit facilities, including our debt service obligations, or if we are unable to refinance our current credit
facilities, we may be forced to reduce or delay capital expenditures or research and development expenditures, seek additional
financing or equity capital, restructure or refinance our debt, or sell assets and our business could be adversely affected.
Economic weakness and uncertainty could adversely affect our revenues, gross margins and expenses.
Our business is impacted by global economic conditions, which have been in recent years and continue to be volatile.
Specifically, our revenues and gross margins depend significantly on global economic conditions and the demand for our products
and services in the markets in which we compete. Economic weakness and uncertainty have resulted, and may result in the
future, in decreased revenue, gross margin, earnings or growth rates and difficulty managing inventory levels. Sustained
uncertainty about global economic conditions may adversely affect demand for our products and services and could cause demand
to differ materially from our expectations as customers curtail or delay spending on our products and services. Economic
weakness and uncertainty also make it more difficult for us to make accurate forecasts of revenues, gross margins and expenses.
The inability of our customers to obtain credit in the future may impair their ability to make timely payments to us. Tightening of
credit by financial institutions could also lead customers to postpone spending or to cancel, decrease or delay their existing or
future orders with us. Customer insolvencies could negatively impact our revenues and our ability to collect receivables.
Financial difficulties experienced by our suppliers or distributors could result in product delays, increased accounts receivable
defaults and inventory challenges. In the event we are impacted by global economic weakness, we may record additional charges
relating to restructuring costs or the impairment of assets and our business and results of operations could be materially and
adversely affected.
Risks related to our recent restatement, accounting review and internal controls
Our internal control over financial reporting and our disclosure controls and procedures were not effective as of
December 31, 2014. We may not be able to properly remediate existing or future weaknesses or deficiencies in our internal
controls, which could adversely affect our ability to produce accurate and timely financial statements, harm our
reputation, negatively impact our stock price and damage our business.