Avid 2000 Annual Report Download - page 52

45
Ireland facility has a termination option in April 2002, which if elected requires the Company to pay certain penalties of
approximately $338,000. The Company also has other various leases which include termination options that if exercised
would result in penalties totaling $160,000. The future minimum lease commitments above include the Companys
obligations through the original lease terms and do not include these penalties.
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 $11.2 million, $12.3 million and $12.4 million for the years
ended December 31, 2000, 1999 and 1998, respectively.
Purchase Commitments
As of December 31, 2000, the Company has entered into non-cancelable purchase commitments for certain components
used in its normal operations. The purchase commitments covered by these agreements are generally for one year and
aggregate approximately $5.8 million.
The Company currently purchases 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.
Transactions with Recourse
The Company, through a third party, provides lease financing options to its customers, including distributors. Under the
terms of these leases, which are generally three years, the Company remains liable for any unpaid principal balance upon
default by the end-user, but such liability is limited in the aggregate based on a percentage of initial amounts funded or, in
certain cases, amounts of unpaid balances. At December 31, 2000, 1999 and 1998, the third partys uncollected balance of
lease receivables with recourse was approximately $92.9 million, $98.2 million and $86.1 million, respectively; at those
same dates, Avids maximum recourse totaled approximately $23.2 million, $22.7 million and $22.3 million, respectively.
The Company records revenue from these transactions upon the shipment of products and maintains a reserve for estimated
losses under this recourse lease program based on historic default rates. To date, the Company has not experienced
significant losses under this financing lease program.
The Company also has an arrangement whereby it receives cash from the transfer of certain receivables to a third party. The
Company is liable to the third party for any amounts not paid by the customer. The Company records a liability for the
amount received, and such liability and the related receivables are relieved upon payment by the customer to the third party.
As of December 31, 2000 and 1999, a liability of $0.3 million and $3.6 million, respectively, was recorded for receivables
transferred which had not been paid as of those dates.
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. (now known as Media 100), a Marlboro, Massachusetts-based company. Avid
is seeking judgment against Data Translation that, among 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 to
prohibit further infringement by Data Translation. The litigation has been dismissed without prejudice (with leave to refile)
pending a decision by the U.S. Patent and Trademark Office on a reissue patent application based on the issued patent.
On March 11, 1996, the Company was named as defendant in a patent infringement suit filed in the United States District
Court for the Western District of Texas by Combined Logic Company, a California partnership located in Beverly Hills,
California. On May 16, 1996, the suit was transferred to the United States District Court for the Southern District of New
York on motion by the Company. The complaint alleges infringement by Avid of U.S. patent number 4,258,385, issued in
1981, and seeks injunctive relief, treble damages and costs, and attorneys fees. The Company believes that it has
meritorious defenses to the complaint and intends to contest it vigorously. However, an adverse resolution of this litigation
could have a material adverse effect on the Companys consolidated 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.