Avid 2009 Annual Report Download - page 26

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During the fourth quarter of 2008, we initiated a company-wide restructuring plan that, through the second quarter of
2009, resulted in a reduction in force of more than 500 positions, including employees associated with product line
divestitures, and the closure of all or parts of twelve facilities worldwide. During the third and fourth quarters of 2009,
as a result of the expanded use of our internationally based partners for R&D projects and our desire to better align our
2010 cost structure with revenue expectations, we broadened the restructuring plan to include additional reductions in
force of approximately 320 positions and the closure of one floor of our Audio segment’s Daly City, California facility.
In connection with restructuring actions initiated in the fourth quarter of 2008 and throughout 2009, we have incurred or
expect to incur total restructuring charges of approximately $53 million, which primarily represent cash expenditures.
We expect annual cost savings of approximately $80 million to result from these actions, some of which are already
reflected in our 2009 results. Cash expenditures resulting from restructuring obligations totaled approximately $25.8
million during 2009. We may engage in additional cost reduction programs, including restructuring actions, in the future
as a result of changing economic conditions as well as our ongoing business transformation.
We derive a significant percentage of our revenues from sales to customers outside the United States. International sales
accounted for 58% of our consolidated net revenues in 2009, compared to 61% and 58% of our consolidated net
revenues for 2008 and 2007, respectively. Our international business is, for the most part, transacted through
international subsidiaries and generally in the currency of the customers. Changes in foreign currency exchange rates
often materially affect, either positively or adversely, our revenues, net income and cash flow.
See ―Risk Factors‖ in Item 1A of this annual report for additional risk factors that may cause our future results to differ
materially from our current expectations.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Our consolidated financial statements have been prepared in accordance with accounting principles generally accepted
in the United States of America. The preparation of these financial statements requires us to make estimates and
assumptions that affect the reported amounts of assets and liabilities and the disclosures of contingent assets and
liabilities as of the date of the financial statements, and the reported amounts of revenues and expenses during the
reporting period. We regularly reevaluate our estimates and judgments, including those related to the following:
revenue recognition and allowances for product returns and exchanges; stock-based compensation; the valuation of
business combinations, goodwill and other intangible assets; divestitures; and income tax assets and liabilities. We base
our estimates and judgments on historical experience and various other factors we believe to be reasonable under the
circumstances, the results of which form the basis for judgments about the carrying values of assets and liabilities and
the amounts of revenues and expenses that are not readily apparent from other sources. Actual results may differ from
these estimates.
We believe the following critical accounting policies most significantly affect the portrayal of our financial condition
and involve our most difficult and subjective estimates and judgments.
Revenue Recognition and Allowances for Product Returns and Exchanges
We generally recognize revenues from sales of software and software-related products upon receipt of a signed
purchase order or contract and product shipment to distributors or end users, provided that collection is reasonably
assured, the fee is fixed or determinable and all other revenue recognition criteria of Financial Accounting Standards
Board, or FASB, Accounting Standards Codification, or ASC, subtopic 985-605, Software – Revenue Recognition
(formerly Statement of Position 97-2, Software Revenue Recognition), are met. However, determining whether and
when some of these criteria have been satisfied often involves assumptions and judgments that can have a significant
impact on the timing and amount of revenue we report. For example, we often receive multiple purchase orders or
contracts from a single customer or a group of related parties that are evaluated to determine if they are, in effect, parts
of a single arrangement. If they are determined to be parts of a single arrangement, revenues are recorded as if a single
multiple-element arrangement exists. In addition, for certain transactions where we consider our services to be non-
routine or essential to the delivered products, we record revenues upon satisfying the criteria of ASC subtopic 985-605
and obtaining customer acceptance. Within our Video segment and much of our Audio segment, we follow the guidance
of ASC subtopic 985-605 for revenue recognition because our products and services are software or software-related.