Avid 2004 Annual Report Download - page 36

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percentage of net revenues, to 23.0% in 2004 from 23.2% in 2003, and to 23.2% in 2003 from 24.0% in 2002, primarily as
a result of the higher revenue base in 2004 compared to 2003 and 2003 compared to 2002.
General and Administrative
General and administrative expenses increased by $6.6 million or 28.3% in 2004 compared to 2003, and increased
by $3.4 million, or 17.1% in 2003 compared to 2002. The increase in expenditures in 2004 was primarily due to higher
audit and legal fees as a result of complying with the Sarbanes-Oxley Act of 2002, and personnel-related costs, in particular
expenses associated with our 2004 bonus plan. The increase in expenditures in 2003 was primarily due to higher personnel-
related costs, in particular expenses associated with our 2003 bonus plan and, to a lesser extent, higher insurance costs and
external legal fees as a result of complying with the Sarbanes-Oxley Act of 2002. General and administrative expenses
increased slightly to 5.1% of net revenues in 2004 as compared to 4.9% in 2003. This percentage increase was due to the
increases discussed above, with the impact being offset by the higher revenue base in 2004. General and administrative
expenses increased as a percentage of net revenues to 4.9% in 2003 from 4.7% in 2002, primarily due to the increases in
expenses discussed above.
Restructuring and Other Costs
Restructuring activity in 2004 was primarily related to paying down existing obligations on vacated facilities.
Additionally, in September 2004, we recorded a charge of $0.2 million to reflect the decrease in rent to be received from
one of our subtenants and reversed a charge of $0.2 million associated with unutilized space in Tewksbury. Our
restructuring actions during 2003 consisted of severance and facility charges made to increase efficiencies and reduce
expenses, and a revision to a previous restructuring charge recorded on unutilized space. In the first quarter of 2003, we
recorded a charge of $1.2 million for employee terminations and $0.6 million for unutilized space in Santa Monica,
California that included a write-off of leasehold improvements of $0.4 million. Also during 2003, we recorded charges of
$1.5 million related to a revision of our estimate of the timing and amount of future sublease income associated with the
Daly City facility discussed below based on working with a real estate broker during the year to attempt to sublease the
space.
In December 2002, we recorded a charge of approximately $3.3 million in connection with vacating excess space
in our Daly City, California; Tewksbury, Massachusetts; and Montreal, Canada facilities. The Tewksbury charge of $0.5
million was a revision of our estimate related to the August 2001 restructuring action discussed below, based on our
attempts to sublet the related space during 2002. The remaining portion of the charge for Daly City and Montreal was the
result of our ceasing to use a portion of each facility in December 2002 and hiring real estate brokers to assist in finding
subtenants. We believe the Daly City charge of $2.4 million reflected a depressed real-estate market in the area.
During 2001, we implemented various restructuring plans to decrease costs through the consolidation of operations
and the reduction of approximately 194 jobs worldwide. In connection with these plans, we recorded charges to operating
expenses totaling $10.0 million. The restructuring charges included approximately $7.4 million for severance and related
costs of terminated employees and $2.6 million for facility vacancy costs, of which $1.0 million represented non-cash
charges relating to the disposition of leasehold improvements that were abandoned upon vacating the related properties in
2001 and 2002. These restructuring actions were expected to result in annual cost savings of approximately $11.0 million,
and management believes that these savings were achieved. In connection with these and prior plans, we made cash
payments in 2001 of $6.2 million related to personnel severance-related costs and $0.6 million related to vacated facilities.
In 2002, we made severance related payments of $1.2 million, facilities-related payments of $0.7 million and wrote off $1.0
million of leasehold improvements. In 2003, we made severance-related payments of $1.5 million and facilities-related
payments of $1.7 million. In 2004, we made facilities-related payments of $1.4 million.
As of December 31, 2004, we have an aggregate obligation under leases for which we have vacated the underlying
facilities of approximately $18.6 million, including facilities in Daly City, California; Tewksbury, Massachusetts; London,
England and Montreal; Canada. We have a remaining restructuring accrual balance for vacated facilities at December 31,
2004 of $3.5 million, which represents the difference between this aggregate obligation and expected future sublease
income under actual or estimated potential sublease agreements. See Notes I and M to our Consolidated Financial
Statements.