Avid 2000 Annual Report Download

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Avid Technology, Inc.
2000 Annual Report

Table of contents

  • Page 1
    A v i d T e c h n o l o g y , I n c . A n n u a l R e p o r t 2 0 0 0

  • Page 2
    ... of Human Resources and Corporate Services David A. Krall President and Chief Executive Officer Eric C. Peters Vice President and Chief Scientist Michael J. Rockwell Vice President and Chief Technology Officer; General Manager, Avid Internet Solutions Ethan E. Jacks Vice President of Business...

  • Page 3
    ... our customers of tying all of our products together into complete end-to-end solutions. As a result, we created a unified operating structure in mid-2000 of four business units: Avid Media Solutions, Avid Internet Solutions, Digidesign, and Softimage. Today, each unit is executing plans to achieve...

  • Page 4
    ... and Move Media, Avid helps 2 customers realize greater 5 operating efficiency and 1 3 4 a faster return on The truth is, Avid's tools have been used for the past 13 years to create some of the most widely recognized video, film, audio, animation, and special effects media in the world. But the...

  • Page 5
    ... e f fi c i e n cy. Avid offers a family of storage and networking solutions specially designed to support all of the Avid products that help to make media. The Avid Unity media network is an integrated group of shared storage and distributed computing products that are designed to improve creative...

  • Page 6
    ... tools; Avid is developing and marketing complete "solutions" that address this need. Avid's goal is simple: enhance the way creative professionals work - today, and for years to come. With innovative solutions capable of â-² move manage make helping our customers to Make, Manage and Move Media...

  • Page 7
    ...Vice President and Corporate Controller © 2001 Avid Technology, Inc. All rights reserved. Avid, Avid Cinema, Avid Xpress, Digidesign, Film Composer, Marquee, Media Composer, NewsCutter, ProControl, Pro Tools and Softimage are registered trademarks and AirSPACE, Avid Production Network, AvidProNet...

  • Page 8
    ... incorporation or organization) 04-2977748 (I.R.S. Employer Identification No.) Avid Technology Park, One Park West, Tewksbury, MA 01876 (Address of principal executive offices) (Zip Code) (978) 640-6789 (Registrant's telephone number, including area code) Securities Registered Pursuant to Section...

  • Page 9
    ... these nonlinear editing systems, we develop and sell a range of image manipulation products that allow users in the video and film post-production and broadcast markets to create graphics and special effects for use in feature films, television shows and advertising, and news programs. The products...

  • Page 10
    ... of video storage and networking solutions for broadcast, news, post-production, and other markets requiring significant bandwidth capacity. This acquisition complements our broadcast offerings and enables customers to more easily adopt nonlinear technology for digital production, storage, and...

  • Page 11
    ... Symphony 3.0, NewsCutter Effects 2.0, NewsCutter XP 1.0, Avid Xpress 4.0, and Avid Xpress DV products. Extend Technology to Analog-Based Market Sectors We believe that we have established unit and revenue market share leadership positions in the professional video and film digital editing markets...

  • Page 12
    ...-party hardware platforms. We released an HD version of Avid|DS in early 2001. Avid Xpress for Macintosh and Windows NT Platforms The Avid Xpress product is a digital, nonlinear video editing system designed to meet the needs of media professionals and video/film educators involved with video and...

  • Page 13
    ... We plan to release a laptop version of Avid Xpress DV in 2001, which will bring portability to our industry leading products. NewsCutter Effects Our NewsCutter Effects product is a computer-based digital, nonlinear video editing system designed to meet the demands of television news production. The...

  • Page 14
    ... control surface, designed for music production and broadcast applications. AVoption and AVoption|XL The AVoption and AVoption|XL products are hardware options for Pro Tools systems that allow the user to record, edit and process sound synchronized with Avid-format, nonlinear digital video. Designed...

  • Page 15
    ... by strategically located dealers, value-added resellers and authorized third-party service providers. Customers may choose from a variety of support offerings, including 24 hour telephone support, quick-response on-site assistance, hardware replacement and software upgrades. Customer training is...

  • Page 16
    ..., customer service and support, brand name awareness, and ease of use. EMPLOYEES The Company employed 1,629 people as of December 31, 2000. ITEM 2. PROPERTIES The CompanyÂ's principal administrative, sales and marketing, research and development, support, and manufacturing facilities are located in...

  • Page 17
    ... financial position or results of operations in the period in which the litigation is resolved. No costs have been accrued for this possible loss contingency. We receive inquiries from time to time with regard to possible patent infringement claims. These inquiries are generally referred to counsel...

  • Page 18
    ... Manager, Digidesign Vice President and General Manager, Avid Media Solutions Vice President of Worldwide Sales, Marketing & Service Vice President and General Manager, Avid Internet Solutions, Chief Technology Officer Vice President and Corporate Controller Vice President of Business Development...

  • Page 19
    ...of International Sales from August 1995 to October 1996, and Managing Director Digidesign UK from May 1993 to August 1995. MICHAEL J. ROCKWELL. Mr. Rockwell was appointed Vice President and General Manager of Avid Internet Solutions in June 2000, and Chief Technology Officer of Avid in February 2000...

  • Page 20
    ... FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS Our common stock is listed on the Nasdaq National Market under the symbol AVID. The table below shows the high and low sales prices of the common stock for each calendar quarter of the fiscal years ended December 31, 2000 and 1999. 2000...

  • Page 21
    ... of Softimage, which we acquired on August 3, 1998. This acquisition was accounted for as a purchase and, accordingly, the results of operations of Softimage are included as of the date of acquisition. The selected consolidated financial data below should be read in conjunction with the "Management...

  • Page 22
    ...: 2000 Pro forma operating income (loss), excluding restructuring and other costs and amortization of acquisition-related intangible assets For the Year Ended December 31, 1999 1998 1997 1996 $11,793 ($290) $49,512 $30,113 ($30,413) ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL...

  • Page 23
    ... distribution of third-party audio-related and Pro Tools compatible products. Other products that contributed to the overall increase were Media Composer upgrades and a full year of sales of Avid Unity MediaNet, introduced in mid 1999, Avid Xpress DV, introduced in early 2000, and Trilligent Cluster...

  • Page 24
    ... 2000, we began shipping several new products and version updates of existing products, including Avid Xpress DV on IBM IntelliStation for the Windows NT platform, SOFTIMAGE|XSI, Avid Symphony 3.0, Media Composer 10.0, Trilligent Cluster, Avid ePublisher, Avid Unity for News, NewsCutter Effects...

  • Page 25
    ... 2000 operating plan. The major elements of the restructuring plan included the termination of certain employees and the vacating of certain facilities. The plan also provided for no further releases of a limited number of existing product offerings, including stand-alone Marquee, Avid Cinema, Media...

  • Page 26
    ...New Graphics, Film and Media Management Capabilities for Effects-Intensive, On-line Finishing. The efforts required to develop this project into a commercially viable product related principally to the rebuilding of the framework architecture, the rewriting of software code of the compositing engine...

  • Page 27
    ... of equipment to support research and development activities. Purchases in 1999 were primarily of hardware and software for our information systems and equipment to support research and development activities. During 2000, we also made a cash investment of $2.1 million in Rocket Network, Inc. and...

  • Page 28
    ...will be made in the open market or in privately negotiated transactions. We have used, and plan to continue to use, any repurchased shares for reissuance under our employee stock plans. During 1998, we repurchased approximately 2.0 million additional shares of common stock at a cost of $61.8 million...

  • Page 29
    ...our core video editing market to address the digital media production needs of the broadcast news market, including cable and Internet news, on-line film and video finishing market, and the emerging market for multimedia production tools, including the Internet and corporate markets. We have limited...

  • Page 30
    ...; timing of new product introductions; product offers and platform upgrades; price discounts and sales promotion programs; volume of sales of aftermarket hardware products; costs of swapping or fixing products released to the market with defects; provisions for inventory obsolescence; allocations of...

  • Page 31
    ...on a number of specific suppliers for certain key components of our products. components include video compression chips manufactured by C-Cube Microsystems; a small computer systems interface (Â"SCSIÂ") accelerator board from ATTO Technology; a 3-D digital video effects board from Pinnacle Systems...

  • Page 32
    ... business. We have launched the Avid Production Network site (AvidProNet.com) to provide interactive information and services to new media and post-production professionals. Our plans for AvidProNet.com include content-hosting, remote reviewing, and stock footage availability. Because materials may...

  • Page 33
    ..., it could slow down or even stop production at major film and television studios. If such a strike were to last for a significant amount of time, the demand for our products could be reduced and our revenues could decline. Our stock price may continue to be volatile. The market price of our common...

  • Page 34
    ... and generally in the currency of the end user customers. This circumstance exposes us to risks associated with changes in foreign currency that can impact revenues, net income (loss) and cash flow. We enter into foreign currency forward-exchange contracts to hedge the foreign exchange exposure of...

  • Page 35
    AVID TECHNOLOGY, INC. ANNUAL REPORT ON FORM 10-K YEAR ENDED DECEMBER 31, 2000 ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY FINANCIAL INFORMATION 28

  • Page 36
    AVID TECHNOLOGY, INC. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE CONSOLIDATED FINANCIAL STATEMENTS INCLUDED IN ITEM 8: Report of Independent Accountants...Consolidated Statements of Operations for the years ended December 31, 2000, 1999 and 1998 ...Consolidated ...

  • Page 37
    ...three years in the period ended December 31, 2000 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in the accompanying index presents fairly, in all material respects, the information set...

  • Page 38
    ..., except per share data) For the Year Ended December 31, 2000 1999 1998 Net revenues Cost of revenues Gross profit Operating expenses: Research and development Marketing and selling General and administrative Restructuring and other costs Amortization of acquisition-related intangible assets Total...

  • Page 39
    (in thousands, except per share data) 2000 ASSETS Current assets: Cash and cash equivalents Marketable securities Accounts receivable, net of allowances of $11,384 and $8,954 at December 31, 2000 and 1999, respectively Inventories Deferred tax assets Prepaid expenses Other current assets Total ...

  • Page 40
    ...) Shares of Common Stock Issued In Treasury 24,157 (957) (1,953) 742 2,435 24 Common Stock Issued $242 Balances at December 31, 1997 Purchase of treasury stock Stock issued pursuant to employee stock plans and related tax benefits Issuance of common stock in connection with acquisition Issuance...

  • Page 41
    ... BY (USED IN) FINANCING ACTIVITIES Effects of exchange rate changes on cash and cash equivalents Net increase (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year For the Year Ended December 31, 2000 1999 1998 ($56,349...

  • Page 42
    ... Avid Technology, Inc. (Â"AvidÂ" or the Â"CompanyÂ") develops, markets, sells and supports a wide range of software and systems for digital media production, management and distribution. Digital media are media elements, whether video or audio or graphics, in which the image, sound or picture...

  • Page 43
    ... or customization of software. Installation of the products is generally routine, requires insignificant effort and is rarely performed by the Company. The Company recognizes revenue from maintenance contracts ratably and from training or other related services as the services are performed. Revenue...

  • Page 44
    ... products or rebates based on purchasing volume, which are accounted for as offsets to revenue upon shipment of related products or expected achievement of purchasing volumes. During the fourth quarter of 2000, the Company adopted EITF 00-10, Â"Accounting for Shipping and Handling Fees and Costs...

  • Page 45
    ...for transfers and servicing of financial assets and extinguishments of liabilities occurring after March 31, 2001. SFAS 140 is effective for recognition and reclassification of collateral and for disclosures relating to securitization transactions and collateral for the CompanyÂ's fiscal year ending...

  • Page 46
    ...,748 Computer and video equipment and software Office equipment Furniture and fixtures Leasehold improvements Less accumulated depreciation and amortization F. ACQUISITIONS AND INVESTMENTS Softimage On August 3, 1998, the Company acquired from Microsoft Corporation ("Microsoft") the common stock...

  • Page 47
    ... graphic, film and media management capabilities for effects-intensive, on-line finishing applications for editing. The nature of the efforts to develop the purchased in-process technology into commercially viable products principally relate to (i) completion of the animation and real-time playback...

  • Page 48
    ...guaranteed future bonus payments of $0.3 million. TMF specializes in applications for the creation, delivery and playback of interactive, rich 3-D media for character-driven games and the web. Pluto is a provider of video storage and networking solutions for broadcast news, post-production and other...

  • Page 49
    ... studios which allows audio professionals to meet and collaborate on the Internet. This investment was accounted for under the cost method. Additionally, in connection with a technology development services agreement with Rocket Network, the Company received warrants to acquire additional shares...

  • Page 50
    ... statutory federal tax rate follows: 2000 (35%) (4) 5 (3) 1999 (35%) (3) (3) 1998 35% 12 (8) (8) (2) (2) 4 Statutory rate Nondeductible acquisition costs Tax credits Foreign operations State taxes, net of federal benefit Foreign sales corporation Other Effective tax rate before special charge and...

  • Page 51
    .... The CompanyÂ's actual effective tax rate of (18%) for the year reflects a tax benefit equal to 29% of this one-time charge. Consolidated results of operations include results of manufacturing operations in Ireland. Income from the sale of products manufactured or developed in Ireland is subject to...

  • Page 52
    ... 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 53
    ... If at any time within two years of the change in control, the officerÂ's employment is terminated by the Company for any reason other than cause or by the officer for good reason, as such terms are defined in the agreement, then the employee is entitled to receive certain severance payments plus an...

  • Page 54
    ... closing price on the applicable offering termination date. Stock Option and Award Plans The Company has several stock-based compensation plans under which employees, officers, directors and consultants may be granted stock awards or options to purchase the CompanyÂ's common stock generally at the...

  • Page 55
    ... $14.75 to $19.63 $19.75 to $45.25 Number Exercisable 629,147 800,296 256,791 827,665 931,451 $0.01 to $45.25 7,056,233 8.06 $15.01 3,445,350 $15.74 Had compensation cost for the CompanyÂ's stock-based compensation plans been determined based on the fair value at the grant...

  • Page 56
    ... major elements of the restructuring plan included the termination of certain employees and the vacating of certain facilities. The plan also provided for no further releases of a limited number of existing product offerings, including stand-alone Marquee, Avid Cinema, Media Illusion and Matador. In...

  • Page 57
    ... shows, broadcast news programs, commercials, music videos, and corporate and home videos. The Professional Audio segment produces digital audio systems for the professional audio market. This operating segment includes products developed to provide audio recording, editing, signal processing...

  • Page 58
    ...segment (in thousands): For the Year Ended December 31, 2000 1999 1998 Video and Film Editing and Effects: Net revenues Depreciation Operating income (loss) Professional Audio: Net revenues Depreciation Operating income (loss) Combined Segments: Net revenues Depreciation Operating income (loss) $353...

  • Page 59
    ... resulting from forward-exchange contracts were included in results of operations for the years ended December 31, 2000, 1999 and 1998, respectively. P. NET LOSS PER COMMON SHARE Diluted net loss per share for the years ended December 31, 2000, 1999 and 1998 excludes the effect of options and...

  • Page 60
    ....000 The Company's quarterly operating results fluctuate as a result of a number of factors including, without limitation, the timing of new product introductions, marketing expenditures, promotional programs, and periodic discounting due to competitive factors. The Company's operating results may...

  • Page 61
    results may be adversely affected. Accordingly, there can be no assurance that the Company will be profitable in any particular quarter. 54

  • Page 62
    ... Flows for the years ended December 31, 2000, 1999 and 1998 Notes to Consolidated Financial Statements FINANCIAL STATEMENT SCHEDULE The following consolidated financial statement schedule is included in Item 14(d): Schedule II Supplemental Valuation and Qualifying Accounts Schedules other than...

  • Page 63
    ... TECHNOLOGY, INC. (Registrant) By: /s/ David Krall David Krall President and Chief Executive Officer (Principal Executive Officer) By: /s/Paul J. Milbury Paul J. Milbury Chief Financial Officer (Principal Financial Officer) By: /s/ Carol L. Reid Carol L. Reid Vice President and Corporate Controller...

  • Page 64
    ...s Avid Technology Europe Limited United Kingdom A s i a n He a d q u a r t e r s Avid Technology, (S.E.) Asia Pte. Ltd. Republic of Singapore Wor l dw i d e O f fi c e s Boulder Chicago Dublin Iver Heath Los Angeles Madison Madrid Montreal Munich New York Palo Alto Paris San Francisco Santa Monica...