Avid 2015 Annual Report Download

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AVID 2015 ANNUAL REPORT

Table of contents

  • Page 1
    AVID 2015 ANNUAL REPORT

  • Page 2
    ...products, we are seeing more of those bookings translate to sustainable EBITDA growth in the long run. We believe 2016 will be the last full year of Avid's dramatic transformation as we expect to be complete by mid-2017. There is still much to do, including aligning our people and resources to drive...

  • Page 3
    ... STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 _____ FORM 10-K (Mark One) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2015 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES...

  • Page 4
    ... Information Report of Independent Registered Public Accounting Firm Changes in and Disagreements with Accountants on Accounting and Financial Disclosure Controls and Procedures Other Information 28 30 32 54 56 57 94 94 98 Business Risk Factors Unresolved Staff Comments Properties Legal Proceedings...

  • Page 5
    ... our cost saving strategies; our ability to develop, market and sell new products and services; anticipated trends relating to our sales, financial condition or results of operations, including our shift to a recurring revenue model and complex enterprise sales with elongated sales cycles; our...

  • Page 6
    ..., but are not limited to, the following: Avid Everywhere, Avid Motion Graphics, AirSpeed, EUCON, iNEWS, Interplay, ISIS, Avid MediaCentral Platform, Mbox, Media Composer, NewsCutter, Nitris, Pro Tools, Sibelius and Symphony. Other trademarks appearing in this Form 10-K are the property of their...

  • Page 7
    ... actions. We anticipate that the restructuring plan will be substantially complete by the end of the second quarter of 2017 and will result in annualized costs savings of appropriately $68 million. Financing Agreement with Cerberus Business Finance, LLC In connection with the cost efficiency program...

  • Page 8
    ... employee base to better serve our customers' needs. We expect these initiatives will be complete in mid-2017. We have organized our existing hardware and software products and introduced new solutions in four suites, all built upon the MediaCentral Platform. These four suites encompass both audio...

  • Page 9
    ..., customers have multiple choices over how they use Avid solutions. The following table presents our net revenues, which includes the amortization of deferred revenues, for the periods indicated (in thousands): Year Ended December 31, 2014 2013 2015 Video products and solutions Audio products and...

  • Page 10
    ... editor, delivered in a way most attractive to the user. In April 2015, we introduced the Avid Artist | DNxIO, a hardware interface designed to accelerate high-resolution video production. When combined with the industry's preeminent Media Composer video editing software, the Avid Artist | DNxIO...

  • Page 11
    ... mix demanding audio productions. The Pro Tools | HD Native Thunderbolt, uses a high-speed Thunderbolt interface to connect to a laptop or desktop computer to eliminate monitor latency while recording. Our audio recording interfaces are designed to deliver high audio quality plus hands-on controls...

  • Page 12
    ...users and alliance partners. The Education team includes the Avid Certification program which validates the skills and competency of Avid users, administrators, instructors, support representatives and developers. Our Customer Care team provides customers with a partner committed to giving them help...

  • Page 13
    ... revenue backlog can be found in "Management's Discussion and Analysis of Financial Condition and Results of Operation." We provide customer care services directly through regional in-house and contracted support centers and major-market field service representatives and indirectly through dealers...

  • Page 14
    ... and 17%, respectively, of our net revenues. For the risks associated with our use of partners for R&D projects, see "Risk Factors" in Item 1A of this Form 10-K. Our company-operated R&D operations are located in: Burlington, Massachusetts; Mountain View, California; Berkeley, California; Santa Cruz...

  • Page 15
    ... of our intellectual property, see "Risk Factors" in Item 1A of this Form 10-K. HISTORY AND EMPLOYEES Avid was incorporated in Delaware in 1987. We are headquartered in Burlington, Massachusetts, with operations in North America, South America, Europe, Asia and Australia. At December 31, 2015, our...

  • Page 16
    ... innovation, respond more quickly to new or emerging technologies and changes in market demand, devote more resources to the development, marketing and sale of their products, successfully expand into emerging and other international markets, or price their products more aggressively than we can...

  • Page 17
    ... of products in appropriate locations, quantities and costs to meet demand. For example, we have focused a significant part of our development efforts on developing our Avid Everywhere Platform, discussed in the preceding risk factor. There can be no assurance that our efforts will be successful in...

  • Page 18
    • the need for our sales representatives to educate customers about the uses and benefits of our products and services, including technical capabilities, security features, potential cost savings and return on investment, which are made available in large-scale deployments,; the desire of ...

  • Page 19
    ..., network disruptions and system and data security breaches, manipulation, destruction or leakage, whether intentional or accidental, could harm our ability to conduct our business, impede development, manufacture or shipment of products, interrupt or delay processing of transactions and reporting...

  • Page 20
    ... maintaining policies and strategies that will be effective in managing these risks in each country where we do business. Our failure to manage these risks successfully, including developing appropriate contingency plans for our outsourced research and development work, could harm our international...

  • Page 21
    ... unable to replace it on a timely basis with a comparably priced provider. We would also have to expend time and resources to train any new development or manufacturing vendor. If any of the vendors were to suffer an interruption in its business, or experience delays, disruptions or quality control...

  • Page 22
    ... feature sets or functionality. The profit margin for each of our products depends in part on the royalty, license and purchase fees we pay in connection with third-party technology. To the extent we add additional third-party technology to our products and we are unable to offset associated costs...

  • Page 23
    ...-party technology or developing our own substitute technology. In the interim, sales of our products may be delayed or suspended or we may be forced to distribute our products with reduced feature sets or functionality. Lengthy procurement lead times and unpredictable life cycles and customer demand...

  • Page 24
    ... selling or using products or services that incorporate the challenged intellectual property; make substantial payments for legal fees, settlement payments or other costs or damages; obtain a license, which may not be available on reasonable terms, to sell or use the relevant technology, which such...

  • Page 25
    ... could impact our customers' purchasing decisions and reduce demand for our products and services. A prolonged disruption of our business could also damage our reputation, particularly among our global news organization customers who are likely to require our solutions and support during such time...

  • Page 26
    ...Capital Resources" in Item 7 of this Form 10-K). If we are unable to generate sufficient cash flow or our borrowings are not sufficient, our liquidity may significantly decrease, which could have an adverse effect on our business. Restrictions in the Financing Agreement may limit our activities. The...

  • Page 27
    ... of revenues from customer transactions occurring prior to 2011 to subsequent periods. The deferred revenues resulted in our reporting net income for the fiscal years 2012, 2013, 2014 and 2015. However, as deferred revenues from periods prior to 2011 are amortized, there are no assurances that...

  • Page 28
    ... 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...

  • Page 29
    ...filing date of this Form 10-K, previously identified material weaknesses in our internal control over financial reporting have not have been fully remediated and we continue to make changes to our finance organization; adopt new accounting and reporting processes and procedures; enhance our revenue...

  • Page 30
    ...' expectations; market reaction to significant corporate initiatives or announcements; our ability to innovate; our relative competitive position within our markets; shifts in markets or demand for our solutions; changes in our relationships with suppliers, resellers, distributors or customers...

  • Page 31
    ... have the right to require us to repurchase their notes upon the occurrence of a fundamental change, which generally means a merger, sale of all or substantially all of our assets, or other similar change of control transaction. To the extent we do not elect to satisfy our conversion obligation by...

  • Page 32
    ... also lease office space for sales operations and research and development in several other domestic and international locations. ITEM 3. LEGAL PROCEEDINGS Securities Class Action Lawsuits In March 2013 and May 2013, two purported securities class action lawsuits were filed against us and certain...

  • Page 33
    ITEM 4. MINE SAFETY DISCLOSURES Not Applicable. 27

  • Page 34
    ... reporting obligations, our common stock resumed trading on the NASDAQ Global Select Market under the symbol AVID, effective December 8, 2014. The table below shows the high and low sales prices of our common stock for each calendar quarter of the fiscal years ended December 31, 2015 and 2014. 2015...

  • Page 35
    ...revenue. The Avid Peer Group Index for 2015 was composed of: Black Box Corporation, Cray Inc., Harmonic Inc., Imation Corp., Pegasystems Inc., Progress Software Corporation, QLogic Corporation, Quantum Corporation, RealD Inc., RealNetworks, Inc., Rovi Corporation, Silicon Graphics International Corp...

  • Page 36
    ... this Form 10-K for a further discussion of the effects of the changes to our revenue recognition policies on our financial results. On July 2, 2012, we exited our consumer business through a sale of the assets of that business. The disposition of our consumer business qualified for presentation as...

  • Page 37
    ... (359,335) $ 2012 70,390 (96,380) 294,361 558,485 347,074 (385,592) $ 2011 32,855 (228,277) 340,590 697,124 346,913 (490,874) The presentation of prior year working capital deficit and long-term liability amounts have been changed to reflect our retrospective adoption of ASU 2015-17, Balance Sheet...

  • Page 38
    ... performance venues; advertising agencies; government and educational institutions; corporate communication departments; and by independent video and audio creative professionals, as well as aspiring professionals. Projects produced using our products include feature films, television programming...

  • Page 39
    ... 31, 2010, which carry a 100% gross margin, partially offset by the revenue recognized as a result of our conclusion that Implied Maintenance Release PCS on Media Composer 8.0 has ended and improved product mix. Operating Expenses Our total operating expenses for 2015 decreased to $301.2 million...

  • Page 40
    ... 2014, management has (i) clearly communicated a policy of no longer providing any Software Updates or other support to customers that are not covered under a paid support plan and (ii) implemented robust digital rights management tools to enforce the policy. With the new policy and technology for...

  • Page 41
    ... of time the product version purchased by the customer is planned to be supported with Software Updates. If facts and circumstances indicate that the original service period of Implied Maintenance Release PCS for a product has changed significantly after original revenue recognition has commenced...

  • Page 42
    ... BESP of Implied Maintenance Release PCS (as a % of Product BESP) Estimated Service Period Professional video creative tools Video storage and workflow solutions Media management solutions Digital audio software and workstations solutions Control surfaces, consoles and live-sound systems Notation...

  • Page 43
    ... contracts are recognized ratably over the service period of the product being supported. From time to time, we offer certain customers free upgrades or specified future products or enhancements. When a software deliverable arrangement contains an Implied Maintenance Release PCS deliverable, revenue...

  • Page 44
    ... on the fact that we have never paid cash dividends, we have no present intention to pay cash dividends and our current credit agreement precludes us from paying dividends. Our expected stock-price volatility assumption is based on recent (six-month trailing) implied volatility of the traded options...

  • Page 45
    ... 2015 and 2014,...policies for the calculation and payment of severance benefits, we account for employee...number of risks and uncertainties, some of which are beyond our control, including future real estate market conditions and our ability to successfully enter into subleases or termination agreements...

  • Page 46
    ... table sets forth certain items from our consolidated statements of operations as a percentage of net revenues for the periods indicated: 2015 Year Ended December 31, 2014 2013 Net revenues: Product revenues Services revenues Total net revenues Cost of revenues Gross margin Operating expenses...

  • Page 47
    ... in audio revenues for the year ended December 31, 2015 were delays in the development of certain features related to Pro Tools 12 software, which reduced revenue recognition and, along with price points that were inconsistent with market dynamics, negatively impacted new product bookings. 41

  • Page 48
    ...(ii) orders for future product deliveries or services that have not yet been invoiced by us. Revenue backlog associated with arrangement consideration paid in advance primarily consists of deferred revenue related to (i) the undelivered portion of annual support contracts, (ii) software arrangements...

  • Page 49
    ... of finished products; warehousing; customer support related to maintenance; royalties for third-party software and hardware included in our products; amortization of technology; and providing professional services and training. Amortization of technology included in cost of revenues represents the...

  • Page 50
    ... services gross margin percentage for 2015, compared to 2014, was attributable to the revenue recognized as a result of the conclusion that Implied Maintenance Release PCS on Media Composer 8.0 has ended and improved product mix. 2014 Compared to 2013 The increase in products gross margin percentage...

  • Page 51
    ... Income for the Years Ended December 31, 2014 and 2013 (dollars in thousands) 2014 Change Expenses $ % 2013 Expenses Research and development expenses Marketing and selling expenses General and administrative expenses Amortization of intangible assets Restructuring costs, net Total operating...

  • Page 52
    ... projects in 2014, compared to 2013, as we develop new products and solutions consistent with our Avid Everywhere strategic vision. Marketing and Selling Expenses Marketing and selling expenses consist primarily of employee salaries and benefits for selling, marketing and pre-sales customer support...

  • Page 53
    ... primarily of employee salaries and benefits for administrative, executive, finance and legal personnel; audit, legal and strategic consulting fees; and insurance, information systems and facilities costs. Information systems and facilities costs reported within general and administrative expenses...

  • Page 54
    ... These intangible assets are amortized using the straight-line method over the estimated useful lives of such assets, which are generally two years to twelve years. Amortization of developed technology is recorded within cost of revenues. Amortization of customer-related intangibles, trade names and...

  • Page 55
    2013 Restructuring Actions In June 2013, our leadership evaluated the marketing and selling teams and, in an effort to better align sales resources with our strategic goals and enhance our global account team approach, eliminated 31 positions. As a result, we recognized related restructuring costs ...

  • Page 56
    ... AND CAPITAL RESOURCES Liquidity and Sources of Cash We have generally funded our operations in recent years through the use of existing cash balances, which we have supplemented from time to time with the proceeds of long-term debt, including from the issuance of the convertible senior notes due...

  • Page 57
    ... program announced in February 2016 and to provide ongoing liquidity, including to fund operations. Financial terms and prepayments. Interest accrues on outstanding borrowings under the Term Loan and the Credit Facility at a rate of either the LIBOR Rate (as defined in the Financing Agreement) plus...

  • Page 58
    ...(1,410) (22,187) Cash used in operating activities aggregated $34.0 million for the year ended December 31, 2015. The cash usage during 2015 was primarily attributable to the annual bonus payments, product development costs, and the professional and consulting services related to the acquisition of...

  • Page 59
    equipment largely consist of computer hardware and software to support R&D activities and information systems and leasehold improvements. Cash Flows from Financing Activities For the year ended December 31, 2015, the net cash flow provided by financing activities reflected $120.4 million net ...

  • Page 60
    ...more than half of our revenues from customers outside the United States. This business is, for the most part, transacted through international subsidiaries and generally in the currency of the end-user customers. Therefore, we are exposed to the risks that changes in foreign currency could adversely...

  • Page 61
    ... call and put options to hedge cash flow risks associated with foreign exchange rates. The aggregate notional value of the outstanding contracts and options was $1.0 million at December 31, 2015. During the years ended December 31, 2015, 2014 and 2013, we recorded net gains (losses) of $1.3 million...

  • Page 62
    ... TECHNOLOGY, INC. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE Page CONSOLIDATED FINANCIAL STATEMENTS INCLUDED IN ITEM 8: Report of Independent Registered Public Accounting Firm Consolidated Statements of Operations for the years ended December 31, 2015, 2014 and 2013...

  • Page 63
    ... accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company's internal control over financial reporting as of December 31, 2015, based on the criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring...

  • Page 64
    AVID TECHNOLOGY, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share data) Year Ended December 31, 2015 Net revenues: Products Services Total net revenues Cost of revenues: Products Services Amortization of intangible assets Total cost of revenues Gross profit Operating ...

  • Page 65
    ... thousands) 2015 Net income Other comprehensive loss: Foreign currency translation adjustments Comprehensive (loss) income The accompanying notes are an integral part of the consolidated financial statements. $ (6,566) (4,086) $ (7,540) 7,188 $ (1,717) 19,436 $ Year Ended December 31, 2014 2013 $ 14...

  • Page 66
    ...or outstanding Common stock, $0.01 par value, 100,000 shares authorized; 42,339 shares issued, and 39,530 shares and 39,294 shares outstanding at December 31, 2015 and 2014, respectively Additional paid-in capital Accumulated deficit Treasury stock at cost, net of reissuances, 2,809 shares and 3,045...

  • Page 67
    ... pursuant to employee stock plans Stock-based compensation Convertible senior notes conversion feature (net of taxes of $6,493 and net of issuance cost of $1,088) Purchase of capped call transaction Repurchase of common stock Net income Other comprehensive loss Balances at December 31, 2015 20,718...

  • Page 68
    ... cash Net cash used in investing activities Cash flows from financing activities: Proceeds from long-term debt, net of issuance costs Payments for repurchase of common stock Cash paid for capped call transaction Proceeds from the issuance of common stock under employee stock plans Common stock...

  • Page 69
    ... and enthusiasts. Projects produced using Avid's products include feature films, television programming, live events, news broadcasts, commercials, music, video and other digital media content. Management Plans The Company has generally funded operations in recent years through the use of existing...

  • Page 70
    ... PCS for the Media Composer, Pro Tools and Sibelius product lines. On Media Composer 8.0 in particular, which was released in May 2014, management has (i) clearly communicated a policy of no longer providing any Software Updates or other support to customers that are not covered under a paid support...

  • Page 71
    ... product version purchased by the customer is planned to be supported with Software Updates. If facts and circumstances indicate that the original service period of Implied Maintenance Release PCS for a product has changed significantly after original revenue recognition has commenced, the Company...

  • Page 72
    ...been delivered and all services, if any, have commenced. Other Revenue Recognition Policies In a limited number of arrangements, the professional services and training to be delivered are considered essential to the functionality of the Company's software products. If services sold in an arrangement...

  • Page 73
    ... for expected returns and other credits. If actual returns differ from the estimates, additional allowances could be required. The following table sets forth the activity in the allowance for sales returns and exchanges for the years ended December 31, 2015, 2014 and 2013 (in thousands): Year Ended...

  • Page 74
    ...customer concentrations, customer credit worthiness and current economic trends. To date, actual bad debts have not differed materially from management's estimates. The following table sets forth the activity in the allowance for doubtful accounts for the years ended December 31, 2015, 2014 and 2013...

  • Page 75
    ... through international subsidiaries and generally in the currency of the end-user customers. Therefore, the Company is exposed to the risks that changes in foreign currency could adversely affect its revenues, net income, cash flow and financial position. The Company uses derivatives in the form of...

  • Page 76
    ... and ready for its intended use. Capitalized costs are recorded as part of property and equipment. Maintenance and training costs are expensed as incurred. Internal use software is amortized on a straight line basis over its estimated useful life, generally three years. Leasehold improvements are...

  • Page 77
    ... period for all of the Company's products is generally 90 days to one year, but can extend up to 5 years depending on the manufacturer's warranty or local law. For internally developed hardware and in cases where the warranty granted to customers for externally sourced hardware is greater than that...

  • Page 78
    ...comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. The new revenue recognition guidance becomes effective for the Company on January 1, 2018, and early...

  • Page 79
    ... incurred merger and integration cost of $5.7 million, which was recorded as general and administrative expenses in the Company's statement of operations. Orad provides 3D real-time graphics, video servers and related asset management solutions. The acquisition adds applications to Avid's Studio...

  • Page 80
    ... to the Company's employees that vest based on performance conditions, market conditions, or a combination of performance or market conditions. The following table sets forth (in thousands) potential common shares that were considered anti-dilutive securities. Year Ended December 31, 2014 2013 2015...

  • Page 81
    ...518 The following table sets forth the net foreign exchange gains (losses) recorded as marketing and selling expenses in the Company's statements of operations during the years ended December 31, 2015, 2014 and 2013 that resulted from foreign currency forward contracts, foreign currency denominated...

  • Page 82
    ...Foreign currency contracts $ 14 $ - $ 14 $ - $ 3,617 $ 572 $ 3,045 $ - Fair Value Measurements at Reporting Date Using Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) December 31, 2014 Financial...

  • Page 83
    ...ended December 31, 2013. Internal use software is amortized on a straight line basis over its estimated useful life of 3 years, and the Company recorded $1.8 million and $0.5 million of amortization expense during 2015 and 2014, respectively. Depreciation and amortization expense related to property...

  • Page 84
    ... costs of internally developed or externally purchased software that form the basis for the Company's products consisted of the following at December 31, 2015 and 2014 (in thousands): December 31, 2015 Gross Accumulated Amortization Net Gross 2014 Accumulated Amortization Net Completed technologies...

  • Page 85
    ...goods and services used in its normal operations. The purchase commitments covered by these agreements are generally for a period of less than one year and in the aggregate total $39.5 million. The Company depends on sole-source suppliers for certain key hardware components of its products. Although...

  • Page 86
    ... or manage inventory levels in response to shifts in customer demand, the Company may have insufficient, excess or obsolete product inventory. Contingencies In March 2013 and May 2013, two purported securities class action lawsuits were filed against the Company and certain of the Company's former...

  • Page 87
    ... by the manufacturer, the Company records an accrual for the related liability based on historical trends and actual material and labor costs. The following table sets forth the activity in the product warranty accrual account for the years ended December 31, 2015, 2014 and 2013 (in thousands...

  • Page 88
    ... and fair value results for stock options granted during the years ended December 31, 2015, 2014 and 2013: Year Ended December 31, 2014 2013 2015 Expected dividend yield Risk-free interest rate Expected volatility Expected life (in years) Weighted-average fair value of options granted (per share...

  • Page 89
    ...value results for shares issued under the ESPP during the years ended December 31, 2015, 2014 and 2013: Year Ended December 31, 2014 2013 2015 Expected dividend yield Risk-free interest rate Expected volatility Expected life (in years) Weighted-average fair value of shares issued (per share) 0.00...

  • Page 90
    ... following captions in the Company's consolidated statements of operations for the years ended December 31, 2015, 2014 and 2013, respectively (in thousands): Year Ended December 31, 2014 2013 2015 Cost of products revenues Cost of services revenues Research and development expenses Marketing and...

  • Page 91
    ... benefits to be paid under the arrangements. O. INCOME TAXES Income from before income taxes and the components of the income tax provision consisted of the following for the years ended December 31, 2015, 2014 and 2013 (in thousands): Year Ended December 31, 2014 2013 2015 Income from operations...

  • Page 92
    ...between 2019 and 2035. The federal net operating loss and tax credit amounts are subject to annual limitations under Section 382 change of ownership rules of the Internal Revenue Code. The Company completed an assessment at March 31, 2015 regarding whether there may have been a Section 382 ownership...

  • Page 93
    ...a credit to additional paid-in capital within stockholders' equity rather than the provision for income taxes. The following table sets forth a reconciliation of the Company's income tax provision (benefit) to the statutory U.S. federal tax amount for the years ended December 31, 2015, 2014 and 2013...

  • Page 94
    ... ended December 31, 2015, represented an initial elimination of 111 positions worldwide during January and February of 2016. 2013 Restructuring Actions In June 2013, the Company's leadership evaluated the marketing and selling teams and, in an effort to better align sales resources with the Company...

  • Page 95
    ... of part of the Company's Dublin, Ireland facility under the 2008 Plan. No further actions are anticipated under the prior years' restructuring plans. Restructuring Summary The following table sets forth the activity in the restructuring accruals for the years ended December 31, 2015, 2014 and 2013...

  • Page 96
    ..., audio, or service revenue. The Company's video products and solutions are designed to improve the productivity of video and film editors and broadcasters by enabling them to edit video, film and sound; manage media assets; and automate workflows. Professional video creative software and hardware...

  • Page 97
    ... was less than 98% of the product of the last reported sale price of the Company's common stock and the conversion rate on such trading day; or (3) upon the occurrence of specified corporate transactions. On or after December 15, 2019 until the close of business on the second scheduled trading day...

  • Page 98
    ... in the Financing Agreement) plus 5.75%, at the option of the Company. The Company must also pay to the Lenders, on a monthly basis, an unused line fee at a rate of 0.5% per annum. The Company may prepay all or any portion of the Term Loan prior to its stated maturity, subject to the payment of...

  • Page 99
    ... of such information. Quarter Ended (In thousands, except per share data) Dec. 31 Net revenues Cost of revenues Amortization of intangible assets Gross profit Operating expenses: Research and development Marketing and selling General and administrative Amortization of intangible assets Restructuring...

  • Page 100
    ... assurance level as a result of the material weaknesses in our internal control over financial reporting, which are described below. As discussed below, our internal control over financial reporting is an integral part of our disclosure controls and procedures. Management's Annual Report on Internal...

  • Page 101
    ...be adversely affected. Monitoring Activities - We did not maintain effective monitoring of controls related to the financial close and reporting process. • • • • During the year ended December 31, 2015, we have designed and implemented effective risk assessment controls to remediate the...

  • Page 102
    ...as early as January 1, 2017, which supersedes nearly all existing revenue recognition guidance, additional changes to our customized software solution and the processes that surround it will be necessary to comply with the new accounting standards. We plan to continue to implement automated controls...

  • Page 103
    ... Stockholders of Avid Technology, Inc. Burlington, Massachusetts We have audited the internal control over financial reporting of Avid Technology, Inc. and subsidiaries (the "Company") as of December 31, 2015, based on criteria established in Internal Control - Integrated Framework (2013) issued by...

  • Page 104
    ... the year ended December 31, 2015 and this report does not affect our report on such financial statements. In our opinion, because of the effect of the material weaknesses identified above on the achievement of the objectives of the control criteria, the Company has not maintained effective internal...

  • Page 105
    ..., with a copy of our Code of Business Conduct and Ethics upon written request to Avid, 75 Network Drive, Burlington, MA 01803, Attention: Corporate Secretary. Our Code of Business Conduct and Ethics is also available in the Investor Relations section of our website at www.avid.com. If we were to...

  • Page 106
    ...' Deficit for the years ended December 31, 2015, 2014 and 2013 Consolidated Statements of Cash Flows for the years ended December 31, 2015, 2014 and 2013 Notes to Consolidated Financial Statements (a) 3. LISTING OF EXHIBITS. The list of exhibits, which are filed or furnished with this report or are...

  • Page 107
    ... to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. AVID TECHNOLOGY, INC. (Registrant) By: /s/ Louis Hernandez, Jr. Louis Hernandez, Jr. Chairman...

  • Page 108
    ... Lease dated as of November 20, 2009 between Avid Technology, Inc. and Netview 1,2,3,4 & 9 LLC (for premises at 75 Network Drive, Burlington, Massachusetts) 1993 Director Stock Option Plan, as amended Second Amended and Restated 1996 Employee Stock Purchase Plan, as amended Amendment No #2 to Second...

  • Page 109
    ...April 22, 2013 between the Registrant and John Frederick 2013 Remediation Bonus Plan Summary of 2014 Annual Executive Incentive Program Agreement and Plan of Merger, dated as of April 12, 2015, by and among Orad Hi-Tech Solutions Form of Voting and Support Agreement between Avid Technology, Inc. and...

  • Page 110
    ... the form of 2.00% Convertible Senior Notes due 2020) Base capped call transaction confirmation, dated as of June 9, 2015, by and between Jefferies International Limited and Avid Technology, Inc., in reference to the 2.00% Convertible Senior Notes due 2020 Credit Agreement among Avid Technology, Inc...

  • Page 111
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  • Page 112
    ... Associate Dean for Strategy and Innovation; Donald K. David Professor of Business Administration, Harvard Business School John H. Park Partner, Jackson Park Capital, LLC Peter M. Westley Partner, Blum Capital Partners, L.P. Avid Corporate Headquarters 75 Network Drive Burlington, MA 01803 tel 978...

  • Page 113
    Avid 75 Network Drive Burlington, MA 01803 USA www.avid.com