Avid 2009 Annual Report Download - page 32

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The amount of income taxes we pay is subject to our interpretation of applicable tax laws in the jurisdictions in which
we file. We have taken and will continue to take tax positions based on our interpretation of such tax laws. There can be
no assurance that a taxing authority will not have a different interpretation of applicable law and assess us with
additional taxes. Should we be assessed with additional taxes, it could have a negative impact on our results of
operations or financial condition.
ASC topic 740 requires that a tax position must be more likely than not to be sustained before being recognized in the
financial statements. It also requires the accrual of interest and penalties as applicable on our unrecognized tax
positions. At December 31, 2009 and 2008, we had gross unrecognized tax benefits, including interest, of $2.3 million
and $3.7 million, respectively. At December 31, 2009 and 2008, $2.3 million and $1.4 million, respectively, represented
the amount of unrecognized tax benefits that, if recognized, would have resulted in a reduction of our effective tax rate.
We conduct operations through manufacturing and distribution subsidiaries in numerous tax jurisdictions around the
world. Our transfer pricing methodology is based on economic studies. The price charged for products, services and
financing among our companies could be challenged by the various tax authorities resulting in additional tax liability,
interest and/or penalties.
RESULTS OF OPERATIONS
Net Revenues
Comparison of 2009 to 2008
Years Ended December 31, 2009 and 2008
(dollars in thousands)
2009
Net Revenues
% of
Consolidated
Net Revenues
2008
Net Revenues
% of
Consolidated
Net Revenues
Change
% Change
in Revenues
Video:
Product revenues
$259,151
41.2%
$425,719
50.4%
($166,568)
(39.1%)
Services revenues
115,859
18.4%
125,987
14.9%
(10,128)
(8.0%)
Total
375,010
59.6%
551,706
65.3%
(176,696)
(32.0%)
Audio:
Product revenues
250,064
39.8%
288,513
34.1%
(38,449)
(13.3%)
Services revenues
3,896
0.6%
4,682
0.6%
(786)
(16.8%)
Total
253,960
40.4%
293,195
34.7%
(39,235)
(13.4%)
Total net revenues:
$628,970
100.0%
$844,901
100.0%
($215,931)
(25.6%)
Excluding a decrease of $53.4 million related to divested or exited product lines, Video product revenues for 2009
decreased $113.2 million. This decrease was the result of decreases in Video product revenues for all products in all
geographic regions largely due to lower sales volumes, which we believe was largely the result of unfavorable
macroeconomic conditions. Throughout 2009 for example, broadcasters were challenged by decreasing advertising
revenues, and capital expenditure budgets for many of our customers have been reduced as a result of tight credit
markets. Internationally, changes in currency exchange rates also contributed to the decrease in Video product revenues.
Video services revenues are derived primarily from maintenance contracts, professional and installation services, and
training. Excluding a decrease of $6.2 million related to divested or exited product lines, Video services revenues for
2009 decreased $3.9 million. This decrease was primarily due to a decrease in maintenance revenues, which was
primarily the result of lower average maintenance contract values. The decrease in maintenance revenues was partially
offset by an increase in professional services revenues.