(Mark One) | |||
x | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2015 | |||
OR | |||
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||
FOR THE TRANSITION PERIOD FROM __________ TO __________ |
Delaware (State or Other Jurisdiction of Incorporation or Organization) | 04-2977748 (I.R.S. Employer Identification No.) |
Title of Each Class | Name of each exchange on which registered | |||
Common Stock, $.01 Par Value | NASDAQ Global Select Market |
Large Accelerated Filer ¨ Non-accelerated Filer ¨ (Do not check if smaller reporting company) | Accelerated Filer x Smaller Reporting Company ¨ |
DOCUMENTS INCORPORATED BY REFERENCE | ||||
Document Description | 10-K Part | |||
Portions of the Registrant’s Proxy Statement for the 2016 Annual Meeting of Stockholders | III |
Page | ||
• | our ability to successfully implement our Avid Everywhere strategic plan and other strategic initiatives, including our cost saving strategies; |
• | our ability to develop, market and sell new products and services; |
• | anticipated trends relating to our sales, financial condition or results of operations, including our shift to a recurring revenue model and complex enterprise sales with elongated sales cycles; |
• | our ability to achieve our goal of expanding our market positions; |
• | the anticipated performance of our products; |
• | our business strategies and market positioning; |
• | our ability to successfully consummate acquisitions or investment transactions and successfully integrate acquired businesses including the acquisition of Orad Hi-Tech Ltd (“Orad”), into our operations; |
• | our anticipated benefits and synergies from and the anticipated financial impact of any acquired business (including Orad); |
• | the anticipated trends and developments in our markets and the success of our products in these markets; |
• | our ability to mitigate and remediate effectively the material weaknesses in our internal control over financial reporting, and the expected timing thereof; |
• | our capital resources and the adequacy thereof; |
• | our ability to service our debt and meet the obligations thereunder, including our ability to satisfy our conversion and repurchase obligations under our convertible senior notes due 2020; |
• | the outcome, impact, costs and expenses of any litigation or government inquiries to which we are or become subject; |
• | the effect of the continuing worldwide macroeconomic uncertainty on our business and results of operation; |
• | the expected timing of recognition of revenue backlog as revenue, and the timing of recognition of revenues from subscription offerings; |
• | estimated asset and liability values and amortization of our intangible assets; |
• | our compliance with covenants contained in the agreements governing our indebtedness; |
• | changes in inventory levels; |
• | seasonal factors; |
• | plans regarding repatriation of foreign earnings; |
• | fluctuations in foreign exchange and interest rates; and |
• | the risk of restatement of our financial statements. |
ITEM 1. | BUSINESS |
• | Artist Suite encompasses all of our products and tools used to create content, including video editing solutions, digital audio workstations (DAW), music notation software, control surfaces and live sound systems. Products and tools in the Artist Suite can be deployed on premise, cloud-enabled, or through a hybrid approach. Users can collaborate to access, edit, and share the same media; and collaborate with others as if they were all in the same facility. |
• | Media Suite includes all of our tools and services used to manage, protect, distribute, and monetize media, including solutions for newsroom management, asset management, and multiplatform distribution. We are also expanding the Media Suite to include metadata tagging, protection and encryption, and analytics. |
• | Studio Suite comprises of in-studio tools for on-air program and viewership enhancement, including 3D real-time graphics, replay servers and sports enhancements. |
• | Storage Suite refers to all of our products and tools used to capture, store, and deliver media, including online storage, nearline storage, and ingest/playout servers. These products and tools work in close concert with the Media Suite’s tagging and asset management. |
• | Broadcast and Media. This market consists of broadcast, government, sports and other organizations that acquire, create, process, and/or distribute audio and video content to a large audience for communication, entertainment, analysis, and/or forensic purposes. Customers in this industry rely on workflows that span content acquisition, creation, editing, distribution, sales and redistribution and utilize all content distribution platforms, including web, mobile, internet protocol television, cable, satellite, on-air and various other proprietary platforms. For this market, we offer a range of open products and solutions including hardware- and software-based video- and audio-editing tools, collaborative workflow and asset management solutions, and automation tools, as well as scalable media storage options. Our domain expertise also allows us to provide customers in this market with a range of professional and consulting services. We sell into this market through our direct sales force and resellers. |
• | Video and Audio Post and Professional. This market is made up of individual artists and entities that create audio and video media as a paid service, but do not currently distribute media to end consumers on a large scale. This industry spans a wide-ranging target audience that includes: independent video editors, facilities and filmmakers that produce video media as a business but are not broadcasters; professional sound designers, editors and mixers and facilities that specialize in the creation of audio for picture; songwriters, musicians, producers, film composers and engineers who compose and record music professionally; technicians, engineers, rental companies and facilities that present, record and broadcast audio and video for live performances; and students and teachers in career technical education programs in high schools, colleges and universities, as well as in post-secondary vocational schools, that prepare students for professional media production careers in the digital workplace. For this market, we offer a range of products and solutions based on the Avid MediaCentral Platform, including hardware- and software-based creative production tools, scalable media storage options and collaborative workflows. Our domain expertise also allows us to provide customers in this market with a broad range of professional services. We sell into this market through storefront and on-line retailers, as well as through our direct sales force and resellers. |
Year Ended December 31, | |||||||||||
2015 | 2014 | 2013 | |||||||||
Video products and solutions | $ | 201,559 | $ | 233,464 | $ | 243,173 | |||||
Audio products and solutions | 134,812 | 145,163 | 152,358 | ||||||||
Total products and solutions | 336,371 | 378,627 | 395,531 | ||||||||
Services | 169,224 | 151,624 | 167,881 | ||||||||
Total net revenues | $ | 505,595 | $ | 530,251 | $ | 563,412 |
Year Ended December 31, | ||||||||
2015 | 2014 | 2013 | ||||||
Video products and solutions | 40 | % | 44 | % | 43 | % | ||
Audio products and solutions | 27 | % | 27 | % | 27 | % | ||
Total products and solutions | 67 | % | 71 | % | 70 | % | ||
Services | 33 | % | 29 | % | 30 | % | ||
Total net revenues | 100 | % | 100 | % | 100 | % |
• | Broadcast and Media: The Associated Press Inc., Belden Inc., Bitcentral Inc., Dalet S.A., EVS Corporation, Harmonic Inc., Imagine Communications Corp, Ross Video Limited and Vizrt Ltd., among others. |
• | Audio and Video Post and Professional: Ableton AG, Autodesk Inc., Blackmagic Design Pty Ltd, Harman International Industries Inc., Universal Audio Inc. and Yamaha Corporation, among others. |
ITEM 1A. | RISK FACTORS |
• | the need for our sales representatives to educate customers about the uses and benefits of our products and services, including technical capabilities, security features, potential cost savings and return on investment, which are made available in large-scale deployments,; |
• | the desire of large and medium size organizations to undertake significant evaluation processes to determine their technology requirements prior to making information technology expenditures; |
• | the negotiation of large, complex, enterprise-wide contracts, as often required by our and our customers' business and legal representatives; |
• | the need for our customers to obtain requisition approvals from various decision makers within their organizations; and |
• | customer budget constraints, economic conditions and unplanned administrative delays. |
• | the financial and administrative burdens associated with compliance with a myriad of environmental, tax and export laws, as well as other business regulations in foreign jurisdictions, including high compliance costs, inconsistencies among jurisdictions, and a lack of administrative or judicial interpretative guidance; |
• | reduced or varied protection for intellectual property rights in some countries; |
• | regional economic downturns; |
• | economic, social and political instability abroad and international security concerns in general and the risk of war; |
• | fluctuations in foreign currency exchange rates; |
• | longer collection cycles for accounts receivable payment cycles and difficulties in enforcing contracts; |
• | difficulties in managing and staffing international implementations and operations, and executing our business strategy internationally; |
• | potentially adverse tax consequences, including the complexities of foreign value added or other tax systems and restrictions on the repatriation of earnings; |
• | increased financial accounting and reporting burdens and complexities; |
• | difficulties in maintaining effective internal controls over financial reporting and disclosure controls; |
• | costs and delays associated with developing products in multiple languages; and |
• | foreign exchange controls that may prevent or limit our ability to repatriate income earned in foreign markets. |
• | failure to realize anticipated returns on investment, cost savings and synergies; |
• | difficulty in assimilating the operations, policies and personnel of the acquired company; |
• | unanticipated costs associated with acquisitions; |
• | challenges in combining product offerings and entering into new markets in which we may not have experience; |
• | distraction of management’s attention from normal business operations; |
• | potential loss of key employees of the acquired company; |
• | difficulty implementing effective internal controls over financial reporting and disclosure controls and procedures; |
• | impairment of relationships with customers or suppliers; |
• | possibility of incurring impairment losses related to goodwill and intangible assets; and |
• | unidentified issues not discovered in due diligence, which may include product quality issues or legal or other contingencies. |
• | cease selling or using products or services that incorporate the challenged intellectual property; |
• | make substantial payments for legal fees, settlement payments or other costs or damages; |
• | obtain a license, which may not be available on reasonable terms, to sell or use the relevant technology, which such license could require royalties that would significantly increase our cost of goods sold; or |
• | redesign products or services to avoid infringement, which such redesign could involve significant costs and result in delayed and/or reduced sales of the affected products. |
• | require us to dedicate a greater percentage of our cash flow from operations to payments on our debt, thereby reducing the availability of cash flow to fund capital expenditures, pursue other acquisitions or investments and use for general corporate purposes; |
• | increase our vulnerability to general adverse economic conditions, including increases in interest rates with respect to borrowings under the Financing Agreement that bear interest at variable rates or when our indebtedness is being refinanced; |
• | limit our ability to obtain additional financing; and |
• | limit our flexibility in planning for, or reacting to, changes in or challenges relating to our business and industry, creating competitive disadvantages compared to other competitors with lower debt levels and borrowing costs. |
• | the timing of large or enterprise-wide sales and our ability to recognize revenues from such sales; |
• | demand planning and logistics; |
• | reliance on third-party reseller and distribution channels; |
• | changes in operating expenses; |
• | price protections and provisions for inventory obsolescence extended to resellers and distributors; |
• | seasonal factors, such as higher consumer demand at year-end; and |
• | complex accounting rules for revenue recognition. |
• | make changes to our finance organization; |
• | adopt new accounting and reporting processes and procedures; |
• | enhance our revenue recognition and other existing accounting policies and procedures; |
• | introduce new or enhanced accounting systems and processes; and |
• | improve our internal control over financial reporting. |
• | period-to-period variations in our revenues or operating results; |
• | our failure to accurately forecast revenues or operating results or to report financial or operating results within the range of our previously issued guidance; |
• | our ability to produce accurate and timely financial statements; |
• | whether our results meet analysts’ expectations; |
• | market reaction to significant corporate initiatives or announcements; |
• | our ability to innovate; |
• | our relative competitive position within our markets; |
• | shifts in markets or demand for our solutions; |
• | changes in our relationships with suppliers, resellers, distributors or customers; |
• | our commencement of, or involvement in, litigation; |
• | short sales, hedging or other derivative transactions involving shares of our common stock; and |
• | shifts in financial markets and fluctuations of exchange rates. |
ITEM 1B. | UNRESOLVED STAFF COMMENTS |
ITEM 2. | PROPERTIES |
ITEM 3. | LEGAL PROCEEDINGS |
ITEM 4. | MINE SAFETY DISCLOSURES |
ITEM 5. | MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES |
2015 | 2014 | ||||||
High | Low | High | Low | ||||
First Quarter | $15.74 | $12.66 | $8.29 | $4.93 | |||
Second Quarter | $17.90 | $13.34 | $7.64 | $6.10 | |||
Third Quarter | $13.68 | $7.62 | $10.55 | $7.45 | |||
Fourth Quarter | $9.04 | $6.09 | $14.48 | $9.25 |
• | the NASDAQ Composite Index (all companies traded on NASDAQ Capital, Global or Global Select Markets), |
• | the Avid Peer Group Index (see details following the graph). |
For the Year Ended December 31, | |||||||||||||||||||
2015 | 2014 | 2013 | 2012 | 2011 | |||||||||||||||
Net revenues (1) | $ | 505,595 | $ | 530,251 | $ | 563,412 | $ | 635,703 | $ | 766,885 | |||||||||
Cost of revenues | 197,445 | 204,471 | 223,909 | 249,008 | 261,718 | ||||||||||||||
Gross profit | 308,150 | 325,780 | 339,503 | 386,695 | 505,167 | ||||||||||||||
Operating expenses: | |||||||||||||||||||
Research and development | 95,898 | 90,390 | 95,249 | 98,879 | 111,129 | ||||||||||||||
Marketing and selling | 122,511 | 133,049 | 133,890 | 153,481 | 163,204 | ||||||||||||||
General and administrative | 74,109 | 81,181 | 77,578 | 52,066 | 50,732 | ||||||||||||||
Amortization of intangible assets | 2,354 | 1,626 | 2,648 | 4,254 | 8,528 | ||||||||||||||
Restructuring costs (recoveries), net | 6,305 | (165 | ) | 5,370 | 24,838 | 6,534 | |||||||||||||
Total operating expenses | 301,177 | 306,081 | 314,735 | 333,518 | 340,127 | ||||||||||||||
Operating income from continuing operations | 6,973 | 19,699 | 24,768 | 53,177 | 165,040 | ||||||||||||||
Other expense, net | (6,408 | ) | (2,783 | ) | (676 | ) | (2,041 | ) | (1,945 | ) | |||||||||
Income from continuing operations before income taxes | 565 | 16,916 | 24,092 | 51,136 | 163,095 | ||||||||||||||
(Benefit from) provision for income taxes | (1,915 | ) | 2,188 | 2,939 | 4,049 | 635 | |||||||||||||
Income from continuing operations, net of tax | 2,480 | 14,728 | 21,153 | 47,087 | 162,460 | ||||||||||||||
Discontinued operations: (2) | |||||||||||||||||||
Gain on divestiture of consumer business | — | — | — | 37,972 | — | ||||||||||||||
Income from divested operations | — | — | — | 7,832 | 63,907 | ||||||||||||||
Income from discontinued operations | — | — | — | 45,804 | 63,907 | ||||||||||||||
Net income | $ | 2,480 | $ | 14,728 | $ | 21,153 | $ | 92,891 | $ | 226,367 | |||||||||
Income per share - basic: | |||||||||||||||||||
Income per share from continuing operations, net of tax – basic | $ | 0.06 | $ | 0.38 | $ | 0.54 | 1.21 | 4.23 | |||||||||||
Income per share from discontinued operations – basic | — | — | — | 1.18 | 1.66 | ||||||||||||||
Net income per common share – basic | $ | 0.06 | $ | 0.38 | $ | 0.54 | $ | 2.39 | $ | 5.89 | |||||||||
Income per share - diluted: | |||||||||||||||||||
Income per share from continuing operations, net of tax – diluted | $ | 0.06 | $ | 0.38 | $ | 0.54 | 1.21 | 4.22 | |||||||||||
Income per share from discontinued operations – diluted | — | — | — | 1.18 | 1.65 | ||||||||||||||
Net income per common share – diluted | $ | 0.06 | $ | 0.38 | $ | 0.54 | $ | 2.39 | $ | 5.87 | |||||||||
Weighted-average common shares outstanding – basic | 39,423 | 39,147 | 39,044 | 38,804 | 38,435 | ||||||||||||||
Weighted-average common shares outstanding – diluted | 40,380 | 39,267 | 39,070 | 38,836 | 38,534 |
(1) | Our revenues and operating results have been affected by the deferral of revenues from customer transactions occurring prior to 2011. On January 1, 2011, we adopted ASU No. 2009-14. Substantially all revenue arrangements prior to January 1, 2011 were generally recognized on a ratable basis over the service period of Implied Maintenance Release PCS. Subsequent to January 1, 2011, product revenues are generally recognized upon delivery and Implied Maintenance PCS and other service and support elements are recognized as services are rendered. See our policy on “Revenue Recognition” in Note B to our Consolidated Financial Statements in Item 8 of this Form 10-K for a further discussion of the effects of the changes to our revenue recognition policies on our financial results. |
(2) | On July 2, 2012, we exited our consumer business through a sale of the assets of that business. The disposition of our consumer business qualified for presentation as discontinued operations. |
As of December 31, | |||||||||||||||||||
2015 | 2014 | 2013 | 2012 | 2011 | |||||||||||||||
Cash, cash equivalents and marketable securities | $ | 17,902 | $ | 25,056 | $ | 48,203 | $ | 70,390 | $ | 32,855 | |||||||||
Working capital deficit (1) | (167,450 | ) | (157,492 | ) | (133,517 | ) | (96,380 | ) | (228,277 | ) | |||||||||
Total assets | 247,926 | 191,599 | 235,142 | 294,361 | 340,590 | ||||||||||||||
Deferred revenues (current and long-term amounts) | 348,382 | 414,840 | 466,832 | 558,485 | 697,124 | ||||||||||||||
Long-term liabilities (1) | 272,599 | 222,641 | 270,594 | 347,074 | 346,913 | ||||||||||||||
Total stockholders’ deficit | (329,572 | ) | (341,070 | ) | (359,335 | ) | (385,592 | ) | (490,874 | ) |
(1) | The presentation of prior year working capital deficit and long-term liability amounts have been changed to reflect our retrospective adoption of ASU 2015-17, Balance Sheet Classification of Deferred Taxes. The standard requires entities to present all deferred tax assets and deferred tax liabilities as non-current in a classified balance sheet. |
ITEM 7. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
• | the pricing established by management when setting prices for deliverables that are intended to be sold on a standalone basis; |
• | contractually stated prices for deliverables that are intended to be sold on a standalone basis; |
• | the pricing of standalone sales that may not qualify as VSOE of fair value due to limited volumes or variation in prices; and |
• | other pricing factors, such as the geographical region in which the products are sold and expected discounts based on the customer size and type. |
Product Group | BESP of Implied Maintenance Release PCS (as a % of Product BESP) | Estimated Service Period | ||
Professional video creative tools | 1% to 13% | 18 to 72 months | ||
Video storage and workflow solutions | 1% to 2% | 72 months | ||
Media management solutions | 1% to 3% | 12 to 72 months | ||
Digital audio software and workstations solutions | 1% to 8% | 12 to 36 months | ||
Control surfaces, consoles and live-sound systems | 1% to 5% | 12 to 96 months | ||
Notation software | 4% to 8% | 12 to 46 months |
Year Ended December 31, | ||||||||
2015 | 2014 | 2013 | ||||||
Net revenues: | ||||||||
Product revenues | 66.5 | % | 71.4 | % | 70.2 | % | ||
Services revenues | 33.5 | % | 28.6 | % | 29.8 | % | ||
Total net revenues | 100.0 | % | 100.0 | % | 100.0 | % | ||
Cost of revenues | 39.1 | % | 38.6 | % | 39.7 | % | ||
Gross margin | 60.9 | % | 61.4 | % | 60.3 | % | ||
Operating expenses: | ||||||||
Research and development | 19.0 | % | 17.0 | % | 16.9 | % | ||
Marketing and selling | 24.2 | % | 25.1 | % | 23.8 | % | ||
General and administrative | 14.7 | % | 15.3 | % | 13.8 | % | ||
Amortization of intangible assets | 0.5 | % | 0.3 | % | 0.5 | % | ||
Restructuring costs, net | 1.2 | % | — | % | 1.0 | % | ||
Total operating expenses | 59.6 | % | 57.7 | % | 55.9 | % | ||
Operating income | 1.3 | % | 3.7 | % | 4.4 | % | ||
Interest and other income (expense), net | (1.2 | )% | (0.5 | )% | (0.1 | )% | ||
Income before income taxes | 0.1 | % | 3.2 | % | 4.3 | % | ||
(Benefit) provision for income taxes | (0.4 | )% | 0.4 | % | 0.5 | % | ||
Net income | 0.5 | % | 2.8 | % | 3.8 | % |
Net Revenues for the Years Ended December 31, 2015 and 2014 | |||||||||||||
(dollars in thousands) | |||||||||||||
2015 | Change | 2014 | |||||||||||
Net Revenues | $ | % | Net Revenues | ||||||||||
Video products and solutions | $ | 201,559 | $ | (31,905 | ) | (13.7)% | $ | 233,464 | |||||
Audio products and solutions | 134,812 | (10,351 | ) | (7.1)% | 145,163 | ||||||||
Total products and solutions | 336,371 | (42,256 | ) | (11.2)% | 378,627 | ||||||||
Services | 169,224 | 17,600 | 11.6% | 151,624 | |||||||||
Total net revenues | $ | 505,595 | $ | (24,656 | ) | (4.6)% | $ | 530,251 |
Net Revenues for the Years Ended December 31, 2014 and 2013 | |||||||||||||
(dollars in thousands) | |||||||||||||
2014 | Change | 2013 | |||||||||||
Net Revenues | $ | % | Net Revenues | ||||||||||
Video products and solutions | $ | 233,464 | $ | (9,709 | ) | (4.0)% | $ | 243,173 | |||||
Audio products and solutions | 145,163 | (7,195 | ) | (4.7)% | 152,358 | ||||||||
Total products and solutions | 378,627 | (16,904 | ) | (4.3)% | 395,531 | ||||||||
Services | 151,624 | (16,257 | ) | (9.7)% | 167,881 | ||||||||
Total net revenues | $ | 530,251 | $ | (33,161 | ) | (5.9)% | $ | 563,412 |
Year Ended December 31, | |||||
2015 | 2014 | 2013 | |||
United States | 37% | 36% | 39% | ||
Other Americas | 7% | 9% | 7% | ||
Europe, Middle East and Africa | 41% | 41% | 38% | ||
Asia-Pacific | 15% | 14% | 16% |
For the Year Ending December 31, | |||||||||||||||||||||||||||
2016 | 2017 | 2018 | 2019 | 2020 | Thereafter | Total | |||||||||||||||||||||
Orders executed prior to January 1, 2011 | $ | 24,772 | $ | 952 | $ | 144 | $ | — | $ | — | $ | — | $ | 25,868 | |||||||||||||
Orders executed or materially modified on or after January 1, 2011 | 244,112 | 117,458 | 68,011 | 35,292 | 21,407 | 39,938 | 526,218 | ||||||||||||||||||||
$ | 268,884 | $ | 118,410 | $ | 68,155 | $ | 35,292 | $ | 21,407 | $ | 39,938 | $ | 552,086 |
• | procurement of components and finished goods; |
• | assembly, testing and distribution of finished products; |
• | warehousing; |
• | customer support related to maintenance; |
• | royalties for third-party software and hardware included in our products; |
• | amortization of technology; and |
• | providing professional services and training. |
Costs of Revenues for the Years Ended December 31, 2015 and 2014 | |||||||||||||
(dollars in thousands) | |||||||||||||
2015 | Change | 2014 | |||||||||||
Costs | $ | % | Costs | ||||||||||
Products | $ | 131,881 | $ | (11,884 | ) | (8.3)% | $ | 143,765 | |||||
Services | 61,501 | 845 | 1.4% | 60,656 | |||||||||
Amortization of intangible assets | 4,063 | 4,013 | 8,026.0% | 50 | |||||||||
Total cost of revenues | 197,445 | (7,026 | ) | (3.4)% | 204,471 | ||||||||
Gross profit | $ | 308,150 | $ | (17,630 | ) | (5.4)% | $ | 325,780 |
Costs of Revenues for the Years Ended December 31, 2014 and 2013 | |||||||||||||
(dollars in thousands) | |||||||||||||
2014 | Change | 2013 | |||||||||||
Costs | $ | % | Costs | ||||||||||
Products | $ | 143,765 | $ | (15,499 | ) | (9.7)% | $ | 159,264 | |||||
Services | 60,656 | (2,521 | ) | (4.0)% | 63,177 | ||||||||
Amortization of intangible assets | 50 | (1,418 | ) | (96.6)% | 1,468 | ||||||||
Total costs of revenues | 204,471 | (19,438 | ) | (8.7)% | 223,909 | ||||||||
Gross profit | $ | 325,780 | $ | (13,723 | ) | (4.0)% | $ | 339,503 |
Gross Margin % for the Years Ended December 31, 2015, 2014 and 2013 | |||||||||
2015 Gross Margin % | (Decrease) Increase in Gross Margin % | 2014 Gross Margin % | Increase (Decrease) in Gross Margin % | 2013 Gross Margin % | |||||
Products | 60.8% | (1.2)% | 62.0% | 2.3% | 59.7% | ||||
Services | 63.7% | 3.7% | 60.0% | (2.4)% | 62.4% | ||||
Total Gross Margin | 60.9% | (0.5)% | 61.4% | 1.1% | 60.3% |
Operating Expenses and Operating Income for the Years Ended December 31, 2015 and 2014 | |||||||||||||
(dollars in thousands) | |||||||||||||
2015 | Change | 2014 | |||||||||||
Expenses | $ | % | Expenses | ||||||||||
Research and development expenses | $ | 95,898 | $ | 5,508 | 6.1% | $ | 90,390 | ||||||
Marketing and selling expenses | 122,511 | (10,538 | ) | (7.9)% | 133,049 | ||||||||
General and administrative expenses | 74,109 | (7,072 | ) | (8.7)% | 81,181 | ||||||||
Amortization of intangible assets | 2,354 | 728 | 44.8% | 1,626 | |||||||||
Restructuring (recoveries) costs, net | 6,305 | 6,470 | (3,921.2)% | (165 | ) | ||||||||
Total operating expenses | $ | 301,177 | $ | (4,904 | ) | (1.6)% | $ | 306,081 | |||||
Operating income | $ | 6,973 | $ | (12,726 | ) | (64.6)% | $ | 19,699 |
Operating Expenses and Operating Income for the Years Ended December 31, 2014 and 2013 | |||||||||||||
(dollars in thousands) | |||||||||||||
2014 | Change | 2013 | |||||||||||
Expenses | $ | % | Expenses | ||||||||||
Research and development expenses | $ | 90,390 | $ | (4,859 | ) | (5.1)% | $ | 95,249 | |||||
Marketing and selling expenses | 133,049 | (841 | ) | (0.6)% | 133,890 | ||||||||
General and administrative expenses | 81,181 | 3,603 | 4.6% | 77,578 | |||||||||
Amortization of intangible assets | 1,626 | (1,022 | ) | (38.6)% | 2,648 | ||||||||
Restructuring costs, net | (165 | ) | (5,535 | ) | (103.1)% | 5,370 | |||||||
Total operating expenses | $ | 306,081 | $ | (8,654 | ) | (2.7)% | $ | 314,735 | |||||
Operating income | $ | 19,699 | $ | (5,069 | ) | (20.5)% | $ | 24,768 |
Year-Over-Year Change in Research and Development Expenses for the Years Ended December 31, 2015 and 2014 | |||||||||||
(dollars in thousands) | |||||||||||
2015 Increase/(Decrease) From 2014 | 2014 Increase/(Decrease) From 2013 | ||||||||||
$ | % | $ | % | ||||||||
Consulting and outside services | $ | 3,209 | 21.2% | $ | 973 | 6.9% | |||||
Facilities and information technology | 1,214 | 7.8% | (2,050 | ) | (11.6)% | ||||||
Computer hardware and supplies | 718 | 14.9% | 1,467 | 43.8% | |||||||
Personnel-related | 598 | 1.1% | (5,150 | ) | (8.9)% | ||||||
Other expenses | (231 | ) | (9.7)% | (99 | ) | (4.0)% | |||||
Total research and development expenses (decrease)/increase | $ | 5,508 | 6.1% | $ | (4,859 | ) | (5.1)% |
Year-Over-Year Change in Marketing and Selling Expenses for Years Ended December 31, 2015 and 2014 | |||||||||||
(dollars in thousands) | |||||||||||
2015 Decrease From 2014 | 2014 Decrease From 2013 | ||||||||||
$ | % | $ | % | ||||||||
Facilities and information technology infrastructure | $ | (4,607 | ) | (14.4)% | $ | (342 | ) | (1.1)% | |||
Personnel-related | (3,461 | ) | (4.5)% | 1,536 | 2.1% | ||||||
Foreign exchange losses (gains) | (2,137 | ) | (235.3)% | 721 | 385.4% | ||||||
Consulting and outside services | (1,278 | ) | (6.5)% | 1,478 | 8.2% | ||||||
Product introduction | — | —% | (3,666 | ) | 100.2% | ||||||
Web advertising | 755 | 4,541.4% | — | —% | |||||||
Other expenses | 190 | 4.4% | (568 | ) | (11.0)% | ||||||
Total marketing and selling expenses decrease | $ | (10,538 | ) | (7.9)% | $ | (841 | ) | (0.6)% |
Year-Over-Year Change in General and Administrative Expenses for the Years Ended December 31, 2015 and 2014 | |||||||||||
(dollars in thousands) | |||||||||||
2015 (Decrease)/Increase From 2014 | 2014 Increase From 2013 | ||||||||||
$ | % | $ | % | ||||||||
Consulting and outside services | $ | (17,426 | ) | (47.4)% | $ | 256 | 0.7% | ||||
Merger and acquisition | 11,162 | 100.0% | — | —% | |||||||
Personnel-related | (1,733 | ) | (5.5)% | 2,325 | 8.0% | ||||||
Facilities and information technology | 480 | 4.9% | 848 | 9.4% | |||||||
Other expenses | 445 | 12.5% | 174 | 5.2% | |||||||
Total general and administrative expenses (decrease)/increase | $ | (7,072 | ) | (8.7)% | $ | 3,603 | 4.6% |
Year-Over-Year Change in Amortization of Intangible Assets for the Years Ended December 31, 2015 and 2014 | |||||||||||
(dollars in thousands) | |||||||||||
2015 Increase From 2014 | 2014 Decrease From 2013 | ||||||||||
$ | % | $ | % | ||||||||
Amortization of intangible assets recorded in cost of revenues | $ | 4,013 | 8,026.0% | $ | (1,418 | ) | (96.6)% | ||||
Amortization of intangible assets recorded in operating expenses | 728 | 44.8% | (1,022 | ) | (38.6)% | ||||||
Total amortization of intangible assets | $ | 4,741 | 282.9% | $ | (2,440 | ) | (59.3)% |
Interest and Other Income (Expense) for the Years Ended December 31, 2015 and 2014 | |||||||||||||
(dollars in thousands) | |||||||||||||
2015 | Change | 2014 | |||||||||||
Income (Expense) | $ | % | Income (Expense) | ||||||||||
Interest income | $ | 113 | $ | (13 | ) | (10.3)% | $ | 126 | |||||
Interest expense | (6,346 | ) | (4,575 | ) | 258.3% | (1,771 | ) | ||||||
Other income (expense), net | (175 | ) | 963 | (84.6)% | (1,138 | ) | |||||||
Total interest and other income (expense), net | $ | (6,408 | ) | $ | (3,625 | ) | 130.3% | $ | (2,783 | ) |
Interest and Other Income (Expense) for the Years Ended December 31, 2014 and 2013 | |||||||||||||
(dollars in thousands) | |||||||||||||
2014 | Change | 2013 | |||||||||||
Income (Expense) | $ | % | Income (Expense) | ||||||||||
Interest income | $ | 126 | $ | (429 | ) | (77.3)% | $ | 555 | |||||
Interest expense | (1,771 | ) | (197 | ) | 12.5% | (1,574 | ) | ||||||
Other income (expense), net | (1,138 | ) | (1,481 | ) | (431.8)% | 343 | |||||||
Total interest and other income (expense), net | $ | (2,783 | ) | $ | (2,107 | ) | 311.7% | $ | (676 | ) |
Provision for Income Taxes for the Years Ended December 31, 2015 and 2014 | |||||||||||||
(dollars in thousands) | |||||||||||||
2015 | Change | 2014 | |||||||||||
Benefit | $ | % | Provision | ||||||||||
Provision for income taxes | $ | (1,915 | ) | $ | (4,103 | ) | (187.5)% | $ | 2,188 |
Provision for Income Taxes for the Years Ended December 31, 2014 and 2013 | |||||||||||||
(dollars in thousands) | |||||||||||||
2014 | Change | 2013 | |||||||||||
Provision | $ | % | Provision | ||||||||||
Provision for income taxes | $ | 2,188 | $ | (751 | ) | (25.6)% | $ | 2,939 |
Year Ended December 31, | |||||||||||
2015 | 2014 | 2013 | |||||||||
Net cash used in operating activities | $ | (34,026 | ) | $ | (9,897 | ) | $ | (9,145 | ) | ||
Net cash used in investing activities | (81,796 | ) | (11,800 | ) | (11,536 | ) | |||||
Net cash provided by (used in) financing activities | 109,558 | (436 | ) | (96 | ) | ||||||
Effect of foreign currency exchange rates on cash and cash equivalents | (890 | ) | (1,014 | ) | (1,410 | ) | |||||
Net decrease in cash and cash equivalents | $ | (7,154 | ) | $ | (23,147 | ) | $ | (22,187 | ) |
Total | Less than 1 Year | 1 – 3 Years | 3 – 5 Years | After 5 Years | |||||||||||||||
Operating leases | $ | 68,031 | $ | 17,825 | $ | 25,251 | $ | 18,242 | $ | 6,713 | |||||||||
Unconditional purchase obligations (a) | 39,500 | 39,500 | — | — | — | ||||||||||||||
$ | 107,531 | $ | 57,325 | $ | 25,251 | $ | 18,242 | $ | 6,713 |
(a) | At December 31, 2015, we had entered into purchase commitments for certain inventory and other goods and services used in our normal operations. The purchase commitments covered by these agreements are generally for a period of less than one year. |
Total | Less than 1 Year | 1 – 3 Years | 3 – 5 Years | After 5 Years | |||||||||||||||
Unrecognized tax positions and related interest | $ | 3,217 | $ | 121 | $ | 3,096 | $ | — | $ | — | |||||||||
Stand-by letters of credit | 2,566 | 723 | 560 | 1,283 | — | ||||||||||||||
$ | 5,783 | $ | 844 | $ | 3,656 | $ | 1,283 | $ | — |
ITEM 7A. | QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK |
ITEM 8. | FINANCIAL STATEMENTS AND SUPPLEMENTARY FINANCIAL INFORMATION |
Page | |
CONSOLIDATED FINANCIAL STATEMENTS INCLUDED IN ITEM 8: | |
Year Ended December 31, | |||||||||||
2015 | 2014 | 2013 | |||||||||
Net revenues: | |||||||||||
Products | $ | 336,371 | $ | 378,627 | $ | 395,531 | |||||
Services | 169,224 | 151,624 | 167,881 | ||||||||
Total net revenues | 505,595 | 530,251 | 563,412 | ||||||||
Cost of revenues: | |||||||||||
Products | 131,881 | 143,765 | 159,264 | ||||||||
Services | 61,501 | 60,656 | 63,177 | ||||||||
Amortization of intangible assets | 4,063 | 50 | 1,468 | ||||||||
Total cost of revenues | 197,445 | 204,471 | 223,909 | ||||||||
Gross profit | 308,150 | 325,780 | 339,503 | ||||||||
Operating expenses: | |||||||||||
Research and development | 95,898 | 90,390 | 95,249 | ||||||||
Marketing and selling | 122,511 | 133,049 | 133,890 | ||||||||
General and administrative | 74,109 | 81,181 | 77,578 | ||||||||
Amortization of intangible assets | 2,354 | 1,626 | 2,648 | ||||||||
Restructuring costs (recoveries), net | 6,305 | (165 | ) | 5,370 | |||||||
Total operating expenses | 301,177 | 306,081 | 314,735 | ||||||||
Operating income | 6,973 | 19,699 | 24,768 | ||||||||
Interest income | 113 | 126 | 555 | ||||||||
Interest expense | (6,346 | ) | (1,771 | ) | (1,574 | ) | |||||
Other (expense) income, net | (175 | ) | (1,138 | ) | 343 | ||||||
Income before income taxes | 565 | 16,916 | 24,092 | ||||||||
(Benefit) provision for income taxes | (1,915 | ) | 2,188 | 2,939 | |||||||
Net income | $ | 2,480 | $ | 14,728 | $ | 21,153 | |||||
Net income per common share – basic and diluted | $ | 0.06 | $ | 0.38 | $ | 0.54 | |||||
Weighted-average common shares outstanding – basic | 39,423 | 39,147 | 39,044 | ||||||||
Weighted-average common shares outstanding – diluted | 40,380 | 39,267 | 39,070 |
Year Ended December 31, | |||||||||||
2015 | 2014 | 2013 | |||||||||
Net income | $ | 2,480 | $ | 14,728 | $ | 21,153 | |||||
Other comprehensive loss: | |||||||||||
Foreign currency translation adjustments | (6,566 | ) | (7,540 | ) | (1,717 | ) | |||||
Comprehensive (loss) income | $ | (4,086 | ) | $ | 7,188 | $ | 19,436 |
December 31, | |||||||
2015 | 2014 | ||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 17,902 | $ | 25,056 | |||
Accounts receivable, net of allowances of $9,226 and $10,692 at December 31, 2015 and 2014, respectively | 58,807 | 54,655 | |||||
Inventories | 48,073 | 48,001 | |||||
Prepaid expenses | 6,548 | 6,892 | |||||
Other current assets | 6,119 | 17,932 | |||||
Total current assets | 137,449 | 152,536 | |||||
Property and equipment, net | 35,481 | 32,136 | |||||
Intangible assets, net | 33,219 | 2,445 | |||||
Goodwill | 32,643 | — | |||||
Long-term deferred tax assets, net | 2,011 | 2,208 | |||||
Other long-term assets | 7,123 | 2,274 | |||||
Total assets | $ | 247,926 | $ | 191,599 | |||
LIABILITIES AND STOCKHOLDERS’ DEFICIT | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 45,511 | $ | 32,951 | |||
Accrued compensation and benefits | 28,124 | 32,636 | |||||
Accrued expenses and other current liabilities | 35,354 | 32,353 | |||||
Income taxes payable | 1,023 | 5,480 | |||||
Short-term debt | 5,000 | — | |||||
Deferred revenues | 189,887 | 206,608 | |||||
Total current liabilities | 304,899 | 310,028 | |||||
Long-term debt | 95,950 | — | |||||
Long-term deferred tax liabilities, net | 3,443 | 136 | |||||
Long-term deferred revenues | 158,495 | 208,232 | |||||
Other long-term liabilities | 14,711 | 14,273 | |||||
Total liabilities | 577,498 | 532,669 | |||||
Commitments and contingencies (Note L) | |||||||
Stockholders’ deficit: | |||||||
Preferred stock, $0.01 par value, 1,000 shares authorized; no shares issued or outstanding | — | — | |||||
Common stock, $0.01 par value, 100,000 shares authorized; 42,339 shares issued, and 39,530 shares and 39,294 shares outstanding at December 31, 2015 and 2014, respectively | 423 | 423 | |||||
Additional paid-in capital | 1,055,838 | 1,049,969 | |||||
Accumulated deficit | (1,319,318 | ) | (1,321,798 | ) | |||
Treasury stock at cost, net of reissuances, 2,809 shares and 3,045 shares at December 31, 2015 and 2014, respectively | (58,336 | ) | (68,051 | ) | |||
Accumulated other comprehensive loss | (8,179 | ) | (1,613 | ) | |||
Total stockholders’ deficit | (329,572 | ) | (341,070 | ) | |||
Total liabilities and stockholders’ deficit | $ | 247,926 | $ | 191,599 |
Shares of Common Stock | Additional | Accumulated Other | Total | ||||||||||||||
Issued | In Treasury | Common Stock | Paid-in Capital | Accumulated Deficit | Treasury Stock | Comprehensive Income (Loss) | Stockholders’ Deficit | ||||||||||
Balances at January 1, 2013 | 42,339 | (3,403 | ) | 423 | 1,039,562 | (1,357,679 | ) | (75,542 | ) | 7,644 | (385,592 | ) | |||||
Stock issued pursuant to employee stock plans | 146 | (3,095 | ) | 2,999 | (96 | ) | |||||||||||
Stock-based compensation | 6,917 | 6,917 | |||||||||||||||
Net income | 21,153 | 21,153 | |||||||||||||||
Other comprehensive loss | (1,717 | ) | (1,717 | ) | |||||||||||||
Balances at December 31, 2013 | 42,339 | (3,257 | ) | 423 | 1,043,384 | (1,336,526 | ) | (72,543 | ) | 5,927 | (359,335 | ) | |||||
Stock issued pursuant to employee stock plans | 212 | (4,928 | ) | 4,492 | (436 | ) | |||||||||||
Stock-based compensation | 11,513 | 11,513 | |||||||||||||||
Net income | 14,728 | 14,728 | |||||||||||||||
Other comprehensive loss | (7,540 | ) | (7,540 | ) | |||||||||||||
Balances at December 31, 2014 | 42,339 | (3,045 | ) | 423 | 1,049,969 | (1,321,798 | ) | (68,051 | ) | (1,613 | ) | (341,070 | ) | ||||
Stock issued pursuant to employee stock plans | 823 | (14,215 | ) | 17,691 | 3,476 | ||||||||||||
Stock-based compensation | 9,514 | 9,514 | |||||||||||||||
Convertible senior notes conversion feature (net of taxes of $6,493 and net of issuance cost of $1,088) | 20,718 | 20,718 | |||||||||||||||
Purchase of capped call transaction | (10,125 | ) | (10,125 | ) | |||||||||||||
Repurchase of common stock | (587 | ) | (23 | ) | (7,976 | ) | (7,999 | ) | |||||||||
Net income | 2,480 | 2,480 | |||||||||||||||
Other comprehensive loss | (6,566 | ) | (6,566 | ) | |||||||||||||
Balances at December 31, 2015 | 42,339 | (2,809 | ) | $423 | $1,055,838 | $(1,319,318) | $(58,336) | $(8,179) | $(329,572) |
Year Ended December 31, | |||||||||||
2015 | 2014 | 2013 | |||||||||
Cash flows from operating activities: | |||||||||||
Net income | $ | 2,480 | $ | 14,728 | $ | 21,153 | |||||
Adjustments to reconcile net income to net cash used in operating activities: | |||||||||||
Depreciation and amortization | 20,088 | 17,954 | 22,767 | ||||||||
(Recovery) provision for doubtful accounts | (23 | ) | (143 | ) | 157 | ||||||
Gain on sales of assets | — | — | (125 | ) | |||||||
Stock-based compensation expense | 9,514 | 11,513 | 6,917 | ||||||||
Non-cash interest expense | 2,890 | 220 | 294 | ||||||||
Unrealized foreign currency transaction gains | (7,013 | ) | (6,730 | ) | (10 | ) | |||||
(Benefit) provision for deferred taxes | (6,693 | ) | 69 | 730 | |||||||
Changes in operating assets and liabilities: | |||||||||||
Accounts receivable | 2,442 | 2,258 | 11,030 | ||||||||
Inventories | 3,056 | 12,122 | 9,021 | ||||||||
Prepaid expenses and other current assets | 10,000 | (2,130 | ) | 4,393 | |||||||
Accounts payable | 11,232 | (947 | ) | (1,416 | ) | ||||||
Accrued expenses, compensation and benefits and other liabilities | (11,842 | ) | (5,758 | ) | 8,932 | ||||||
Income taxes payable | (1,041 | ) | (1,090 | ) | (1,324 | ) | |||||
Deferred revenues | (69,116 | ) | (51,963 | ) | (91,664 | ) | |||||
Net cash used in operating activities | (34,026 | ) | (9,897 | ) | (9,145 | ) | |||||
Cash flows from investing activities: | |||||||||||
Purchases of property and equipment | (15,330 | ) | (13,292 | ) | (11,625 | ) | |||||
Change in other long-term assets | (43 | ) | (8 | ) | (36 | ) | |||||
Payments for business acquisitions, net of cash acquired | (65,967 | ) | — | — | |||||||
Proceeds from divestiture of consumer business | — | 1,500 | — | ||||||||
Proceeds from sale of assets | — | — | 125 | ||||||||
Increase in restricted cash | (456 | ) | — | — | |||||||
Net cash used in investing activities | (81,796 | ) | (11,800 | ) | (11,536 | ) | |||||
Cash flows from financing activities: | |||||||||||
Proceeds from long-term debt, net of issuance costs | 120,401 | — | — | ||||||||
Payments for repurchase of common stock | (7,999 | ) | — | — | |||||||
Cash paid for capped call transaction | (10,125 | ) | — | — | |||||||
Proceeds from the issuance of common stock under employee stock plans | 5,035 | 252 | 177 | ||||||||
Common stock repurchases for tax withholdings for net settlement of equity awards | (1,559 | ) | (688 | ) | (273 | ) | |||||
Proceeds from revolving credit facilities | 70,500 | 25,500 | — | ||||||||
Payments on revolving credit facilities | (65,500 | ) | (25,500 | ) | — | ||||||
Payments for credit facility issuance costs | (1,195 | ) | — | — | |||||||
Net cash provided by (used in) financing activities | 109,558 | (436 | ) | (96 | ) | ||||||
Effect of exchange rate changes on cash and cash equivalents | (890 | ) | (1,014 | ) | (1,410 | ) | |||||
Net decrease in cash and cash equivalents | (7,154 | ) | (23,147 | ) | (22,187 | ) | |||||
Cash and cash equivalents at beginning of year | 25,056 | 48,203 | 70,390 | ||||||||
Cash and cash equivalents at end of year | $ | 17,902 | $ | 25,056 | $ | 48,203 | |||||
Supplemental information: | |||||||||||
Cash paid for income taxes, net of refunds | $ | 2,251 | $ | 2,146 | $ | 2,173 | |||||
Cash paid for interest | 3,456 | 1,551 | 1,281 | ||||||||
Non-cash transaction – property and equipment included in accounts payable or accruals | 500 | — | — | ||||||||
Issuance costs for long-term debt | 130 | — | — |
A. | BUSINESS |
B. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
• | the pricing established by management when setting prices for deliverables that are intended to be sold on a standalone basis; |
• | contractually stated prices for deliverables that are intended to be sold on a standalone basis; |
• | the pricing of standalone sales that may not qualify as VSOE of fair value due to limited volumes or variation in prices; and |
• | other pricing factors, such as the geographical region in which the products are sold and expected discounts based on the customer size and type. |
Year Ended December 31, | |||||||||||
2015 | 2014 | 2013 | |||||||||
Allowance for sales returns and exchanges – beginning of year | $ | 9,510 | $ | 12,519 | $ | 19,460 | |||||
Additions and adjustments to the allowance | 8,468 | 9,260 | 9,243 | ||||||||
Deductions against the allowance | (9,395 | ) | (12,269 | ) | (16,184 | ) | |||||
Allowance for sales returns and exchanges – end of year | $ | 8,583 | $ | 9,510 | $ | 12,519 |
Year Ended December 31, | |||||||||||
2015 | 2014 | 2013 | |||||||||
Allowance for doubtful accounts – beginning of year | $ | 1,182 | $ | 1,444 | $ | 1,517 | |||||
Bad debt (recovery) expense | (23 | ) | (143 | ) | 157 | ||||||
Reduction in allowance for doubtful accounts | (516 | ) | (119 | ) | (230 | ) | |||||
Allowance for doubtful accounts – end of year | $ | 643 | $ | 1,182 | $ | 1,444 |
Depreciable Life (years) | ||||
Minimum | Maximum | |||
Computer and video equipment and software, including internal use software | 2 | 5 | ||
Manufacturing tooling and testbeds | 3 | 5 | ||
Office equipment | 3 | 5 | ||
Furniture, fixtures and other | 3 | 8 |
C. | ACQUISITION |
Cash | $ | 7,477 | |
Accounts receivable, net | 6,625 | ||
Inventories | 3,128 | ||
Other current assets | 1,217 | ||
Property and equipment | 1,338 | ||
Identifiable intangible assets | 37,200 | ||
Other assets | 3,187 | ||
Goodwill | 32,643 | ||
Total assets acquired | 92,815 | ||
Accounts payable | (1,395 | ) | |
Accrued expenses and other current liabilities | (7,769 | ) | |
Deferred revenue and deposits | (2,714 | ) | |
Deferred tax liabilities, net | (3,554 | ) | |
Other long-term liabilities | (3,939 | ) | |
Total liabilities assumed | (19,371 | ) | |
Net assets acquired | $ | 73,444 |
Weighted Average Life (Years) | Amount | |||
Core and completed technology | 4 | $ | 31,200 | |
Customer relationships | 4 | 5,800 | ||
Trade name | 1 | 200 | ||
Total | $ | 37,200 |
Year Ended December 31, | |||||||
2015 | 2014 | ||||||
Net revenues | $ | 520,918 | $ | 570,766 | |||
Net (loss) income | (2,300 | ) | 8,638 | ||||
Net (loss) income per share: | |||||||
Basic | $ | (0.06 | ) | $ | 0.22 | ||
Diluted | $ | (0.06 | ) | $ | 0.22 |
D. | NET INCOME PER SHARE |
Year Ended December 31, | ||||||||
2015 | 2014 | 2013 | ||||||
Options | 1,901 | 4,748 | 5,193 | |||||
Non-vested restricted stock units | 470 | 118 | 352 | |||||
Anti-dilutive potential common shares | 2,371 | 4,866 | 5,545 |
E. | FOREIGN CURRENCY CONTRACTS |
Derivatives Not Designated as Hedging Instruments Under Accounting Standards Codification (“ASC”) Topic 815 | Balance Sheet Classification | Fair Value at December 31, 2015 | Fair Value at December 31, 2014 | |||
Financial liabilities: | ||||||
Foreign currency contracts | Accrued expenses and other current liabilities | $14 | $518 |
Twelve Months Ended December 31, | ||||||
2015 | 2014 | 2013 | ||||
Net foreign exchange gain (loss) recorded in marketing and selling expenses | $1,288 | $(908) | $(187) |
F. | FAIR VALUE MEASUREMENTS |
Fair Value Measurements at Reporting Date Using | |||||||||||||||
December 31, 2015 | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | ||||||||||||
Financial Assets: | |||||||||||||||
Deferred compensation investments (1) | $ | 3,617 | $ | 572 | $ | 3,045 | $ | — | |||||||
Financial Liabilities: | |||||||||||||||
Foreign currency contracts | $ | 14 | $ | — | $ | 14 | $ | — |
Fair Value Measurements at Reporting Date Using | |||||||||||||||
December 31, 2014 | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | ||||||||||||
Financial Assets: | |||||||||||||||
Deferred compensation investments | $ | 1,859 | $ | 1,245 | $ | 614 | $ | — | |||||||
Financial Liabilities: | |||||||||||||||
Foreign currency contracts | $ | 518 | $ | — | $ | 518 | $ | — |
G. | ACCOUNTS RECEIVABLE |
December 31, | |||||||
2015 | 2014 | ||||||
Accounts receivable | $ | 68,033 | $ | 65,347 | |||
Less: | |||||||
Allowance for doubtful accounts | (643 | ) | (1,182 | ) | |||
Allowance for sales returns and rebates | (8,583 | ) | (9,510 | ) | |||
Total | $ | 58,807 | $ | 54,655 |
H. | INVENTORIES |
December 31, | |||||||
2015 | 2014 | ||||||
Raw materials | $ | 9,594 | $ | 9,942 | |||
Work in process | 256 | 248 | |||||
Finished goods | 38,223 | 37,811 | |||||
Total | $ | 48,073 | $ | 48,001 |
I. | PROPERTY AND EQUIPMENT |
December 31, | ||||||||
2015 | 2014 | |||||||
Computer and video equipment and software | $ | 116,751 | $ | 113,220 | ||||
Manufacturing tooling and testbeds | 3,044 | 2,327 | ||||||
Office equipment | 4,942 | 4,664 | ||||||
Furniture, fixtures and other | 9,621 | 8,659 | ||||||
Leasehold improvements | 33,744 | 29,431 | ||||||
168,102 | 158,301 | |||||||
Less: Accumulated depreciation and amortization | 132,621 | 126,165 | ||||||
Total | $ | 35,481 | $ | 32,136 |
J. | INTANGIBLE ASSETS AND GOODWILL |
December 31, | |||||||||||||||||||||||
2015 | 2014 | ||||||||||||||||||||||
Gross | Accumulated Amortization | Net | Gross | Accumulated Amortization | Net | ||||||||||||||||||
Completed technologies and patents | $ | 58,032 | $ | (30,902 | ) | $ | 27,130 | $ | 51,950 | $ | (51,950 | ) | $ | — | |||||||||
Customer relationships | 54,656 | (48,767 | ) | 5,889 | 49,216 | (46,771 | ) | 2,445 | |||||||||||||||
Trade names | 1,346 | (1,146 | ) | 200 | 5,936 | (5,936 | ) | — | |||||||||||||||
Capitalized software costs | 4,911 | (4,911 | ) | — | 5,043 | (5,043 | ) | — | |||||||||||||||
Total | $ | 118,945 | $ | (85,726 | ) | $ | 33,219 | $ | 112,145 | $ | (109,700 | ) | $ | 2,445 |
K. | OTHER LONG-TERM LIABILITIES |
December 31, | |||||||
2015 | 2014 | ||||||
Deferred rent | $ | 6,755 | $ | 8,236 | |||
Accrued restructuring | 647 | 1,334 | |||||
Deferred compensation | 7,309 | 4,703 | |||||
Total | $ | 14,711 | $ | 14,273 |
Year Ending December 31, | |||
2016 | $ | 17,825 | |
2017 | 14,135 | ||
2018 | 11,116 | ||
2019 | 11,042 | ||
2020 | 7,200 | ||
Thereafter | 6,713 | ||
Total | $ | 68,031 |
Accrual balance at January 1, 2013 | $ | 4,476 | |
Accruals for product warranties | 5,346 | ||
Cost of warranty claims | (6,321 | ) | |
Accrual balance at December 31, 2013 | 3,501 | ||
Accruals for product warranties | 3,985 | ||
Cost of warranty claims | (4,694 | ) | |
Accrual balance at December 31, 2014 | 2,792 | ||
Accruals for product warranties | 3,025 | ||
Cost of warranty claims | (3,583 | ) | |
Accrual balance at December 31, 2015 | $ | 2,234 |
M. | CAPITAL STOCK |
Total Shares | Weighted- Average Exercise Price | Weighted- Average Remaining Contractual Term (years) | Aggregate Intrinsic Value (in thousands) | ||
Options outstanding at January 1, 2015 | 5,564,111 | $11.20 | |||
Granted | 4,000 | $9.10 | |||
Exercised | (421,961 | ) | $9.55 | ||
Forfeited or canceled | (800,816 | ) | $14.84 | ||
Options outstanding at December 31, 2015 | 4,345,334 | $10.68 | 4.05 | $— | |
Options vested at December 31, 2015 or expected to vest | 4,289,778 | $10.72 | 4.03 | $— | |
Options exercisable at December 31, 2015 | 3,622,761 | $11.28 | 3.82 | $— |
Year Ended December 31, | ||||||
2015 | 2014 | 2013 | ||||
Expected dividend yield | 0.00% | 0.00% | 0.00% | |||
Risk-free interest rate | 1.07% | 1.24% | 0.87% | |||
Expected volatility | 52.0% | 50.3% | 50.1% | |||
Expected life (in years) | 4.48 | 4.16 | 4.68 | |||
Weighted-average fair value of options granted (per share) | $3.91 | $3.03 | $3.33 |
Non-Vested Restricted Stock Units | |||||
Total Shares | Weighted- Average Grant-Date Fair Value | Weighted- Average Remaining Contractual Term (years) | Aggregate Intrinsic Value (in thousands) | ||
Non-vested at January 1, 2015 | 811,880 | $10.01 | |||
Granted | 1,264,116 | $10.31 | |||
Vested | (421,314 | ) | $10.04 | ||
Forfeited | (388,674 | ) | $10.90 | ||
Non-vested at December 31, 2015 | 1,266,008 | $9.97 | 0.99 | $9,216 | |
Expected to vest | 820,741 | $11.14 | 0.94 | $5,975 |
Year Ended December 31, | |||||
2015 | 2014 | 2013 | |||
Expected dividend yield | 0.00% | 0.00% | 0.00% | ||
Risk-free interest rate | 0.03% | 0.09% | 0.09% | ||
Expected volatility | 37.0% | 35.0% | 51.0% | ||
Expected life (in years) | 0.24 | 0.17 | 0.25 | ||
Weighted-average fair value of shares issued (per share) | $2.15 | $2.02 | $1.00 |
Year Ended December 31, | ||||||||
2015 | 2014 | 2013 | ||||||
Shares issued under the ESPP | 98,300 | — | 27,936 | |||||
Average price of shares issued | $10.17 | $— | $6.29 |
Year Ended December 31, | |||||||||||
2015 | 2014 | 2013 | |||||||||
Cost of products revenues | $ | 199 | $ | 397 | $ | 360 | |||||
Cost of services revenues | 624 | 279 | 436 | ||||||||
Research and development expenses | 461 | 502 | 582 | ||||||||
Marketing and selling expenses | 1,785 | 3,658 | 1,778 | ||||||||
General and administrative expenses | 6,445 | 6,677 | 3,761 | ||||||||
Total | $ | 9,514 | $ | 11,513 | $ | 6,917 |
N. | EMPLOYEE BENEFIT PLANS |
O. | INCOME TAXES |
Year Ended December 31, | |||||||||||
2015 | 2014 | 2013 | |||||||||
Income from operations before income taxes: | |||||||||||
United States | $ | (23,977 | ) | $ | (6,864 | ) | $ | (16,414 | ) | ||
Foreign | 24,542 | 23,780 | 40,506 | ||||||||
Total income from operations before income taxes | $ | 565 | $ | 16,916 | $ | 24,092 | |||||
(Benefit) provision for income taxes: | |||||||||||
Current tax expense (benefit): | |||||||||||
Federal | $ | 115 | $ | 14 | $ | (104 | ) | ||||
State | 3 | 83 | 114 | ||||||||
Foreign benefit of net operating losses | (180 | ) | (180 | ) | (170 | ) | |||||
Other foreign | 3,734 | 2,217 | 2,369 | ||||||||
Total current tax expense | 3,672 | 2,134 | 2,209 | ||||||||
Deferred tax (benefit) expense: | |||||||||||
Federal benefit related to Note issuance | (6,493 | ) | — | — | |||||||
Other foreign | 906 | 54 | 730 | ||||||||
Total deferred tax (benefit) expense | (5,587 | ) | 54 | 730 | |||||||
Total (benefit) provision for income taxes | $ | (1,915 | ) | $ | 2,188 | $ | 2,939 |
December 31, | |||||||
2015 | 2014 | ||||||
Deferred tax assets: | |||||||
Tax credit and net operating loss carryforwards | $ | 318,471 | $ | 290,523 | |||
Allowances for bad debts | 372 | 231 | |||||
Difference in accounting for: | |||||||
Revenues | 54,475 | 63,916 | |||||
Costs and expenses | 34,116 | 29,004 | |||||
Inventories | 7,576 | 7,004 | |||||
Acquired intangible assets | 9,799 | 13,667 | |||||
Gross deferred tax assets | 424,809 | 404,345 | |||||
Valuation allowance | (406,123 | ) | (398,733 | ) | |||
Deferred tax assets after valuation allowance | 18,686 | 5,612 | |||||
Deferred tax liabilities: | |||||||
Difference in accounting for: | |||||||
Costs and expenses | (5,654 | ) | (3,540 | ) | |||
Acquired intangible assets | (8,554 | ) | — | ||||
Basis difference convertible notes | (5,910 | ) | — | ||||
Gross deferred tax liabilities | (20,118 | ) | (3,540 | ) | |||
Net deferred tax (liabilities) assets | $ | (1,432 | ) | $ | 2,072 | ||
Recorded as: | |||||||
Long-term deferred tax assets, net | 2,011 | 2,208 | |||||
Long-term deferred tax liabilities, net | (3,443 | ) | (136 | ) | |||
Net deferred tax (liabilities) assets | $ | (1,432 | ) | $ | 2,072 |
Year Ended December 31, | |||||||||||
2015 | 2014 | 2013 | |||||||||
Statutory tax | $ | 198 | $ | 5,921 | $ | 8,432 | |||||
Tax credits | (2,972 | ) | (1,589 | ) | (1,482 | ) | |||||
Foreign operations | (4,055 | ) | (6,047 | ) | (10,542 | ) | |||||
Non-deductible expenses and other | 2,303 | 771 | 516 | ||||||||
Federal benefit related to Note issuance | (6,493 | ) | — | — | |||||||
Increase in valuation allowance | 9,104 | 3,132 | 6,015 | ||||||||
(Benefit) provision for income taxes | $ | (1,915 | ) | $ | 2,188 | $ | 2,939 |
Unrecognized tax benefits at January 1, 2013 | $ | 22,629 | |
Increases for tax positions taken during a prior period | 2,205 | ||
Decreases related to the lapse of applicable statutes of limitations | (105 | ) | |
Unrecognized tax benefits at December 31, 2013 | 24,729 | ||
Increases for tax positions taken during a prior period | 1,118 | ||
Unrecognized tax benefits at December 31, 2014 | 25,847 | ||
Increases for tax positions taken during a prior period | 148 | ||
Unrecognized tax benefits at December 31, 2015 | $ | 25,995 |
P. | RESTRUCTURING COSTS AND ACCRUALS |
Employee- Related | Facilities- Related & Other | Total | |||||||||
Accrual balance at January 1, 2013 | $ | 4,298 | $ | 11,433 | $ | 15,731 | |||||
New restructuring charges – operating expenses | 3,539 | — | 3,539 | ||||||||
Revisions of estimated liabilities | 50 | 1,781 | 1,831 | ||||||||
Accretion | — | 612 | 612 | ||||||||
Cash payments | (5,469 | ) | (7,736 | ) | (13,205 | ) | |||||
Foreign exchange impact on ending balance | (19 | ) | 12 | (7 | ) | ||||||
Accrual balance at December 31, 2013 | 2,399 | 6,102 | 8,501 | ||||||||
New restructuring charges – operating expenses | — | — | — | ||||||||
Revisions of estimated liabilities | — | (165 | ) | (165 | ) | ||||||
Accretion | — | 565 | 565 | ||||||||
Cash payments | (2,340 | ) | (4,172 | ) | (6,512 | ) | |||||
Foreign exchange impact on ending balance | (1 | ) | (45 | ) | (46 | ) | |||||
Accrual balance at December 31, 2014 | 58 | 2,285 | 2,343 | ||||||||
New restructuring charges – operating expenses | 5,766 | — | 5,766 | ||||||||
Revisions of estimated liabilities | — | 539 | 539 | ||||||||
Accretion | — | 226 | 226 | ||||||||
Cash payments | (315 | ) | (1,301 | ) | (1,616 | ) | |||||
Foreign exchange impact on ending balance | — | (78 | ) | (78 | ) | ||||||
Accrual balance at December 31, 2015 | $ | 5,509 | $ | 1,671 | $ | 7,180 |
Q. | PRODUCT AND GEOGRAPHIC INFORMATION |
Year Ended December 31, | |||||||||||
2015 | 2014 | 2013 | |||||||||
Video products and solutions | $ | 201,559 | $ | 233,464 | $ | 243,173 | |||||
Audio products and solutions | 134,812 | 145,163 | 152,358 | ||||||||
Total products and solutions | 336,371 | 378,627 | 395,531 | ||||||||
Services | 169,224 | 151,624 | 167,881 | ||||||||
Total net revenues | $ | 505,595 | $ | 530,251 | $ | 563,412 |
Year Ended December 31, | |||||||||||
2015 | 2014 | 2013 | |||||||||
Revenues: | |||||||||||
United States | $ | 185,109 | $ | 193,060 | $ | 218,154 | |||||
Other Americas | 37,081 | 45,342 | 43,131 | ||||||||
Europe, Middle East and Africa | 206,192 | 217,767 | 214,441 | ||||||||
Asia-Pacific | 77,213 | 74,082 | 87,686 | ||||||||
Total net revenues | $ | 505,595 | $ | 530,251 | $ | 563,412 |
December 31, | |||||||
2015 | 2014 | ||||||
Long-lived assets: | |||||||
United States | $ | 30,684 | $ | 30,465 | |||
Other countries | 11,920 | 3,945 | |||||
Total long-lived assets | $ | 42,604 | $ | 34,410 |
R. | LONG TERM DEBT AND CREDIT AGREEMENT |
December 31, 2015 | |||
Principal amount of Notes | $ | 125,000 | |
Original debt discount due to: | |||
Allocation of proceeds to equity | (28,299 | ) | |
Allocation of issuance costs to debt | (3,641 | ) | |
Accumulated accretion | 2,890 | ||
Net carrying value | $ | 95,950 |
(In thousands, except per share data) | Quarter Ended | ||||||||||||||||||||||||||||||
2015 | 2014 | ||||||||||||||||||||||||||||||
Dec. 31 | Sept. 30 | June 30 | Mar. 31 | Dec. 31 | Sept. 30 | June 30 | Mar. 31 | ||||||||||||||||||||||||
Net revenues | $ | 138,806 | $ | 137,436 | $ | 109,767 | $ | 119,586 | $ | 128,196 | $ | 142,429 | $ | 124,644 | $ | 134,982 | |||||||||||||||
Cost of revenues | 54,912 | 47,672 | 43,306 | 47,492 | 50,548 | 52,788 | 50,420 | 50,665 | |||||||||||||||||||||||
Amortization of intangible assets | 1,950 | 1,950 | 163 | — | — | — | — | 50 | |||||||||||||||||||||||
Gross profit | 81,944 | 87,814 | 66,298 | 72,094 | 77,648 | 89,641 | 74,224 | 84,267 | |||||||||||||||||||||||
Operating expenses: | |||||||||||||||||||||||||||||||
Research and development | 24,190 | 25,225 | 23,310 | 23,173 | 23,212 | 22,154 | 22,070 | 22,954 | |||||||||||||||||||||||
Marketing and selling | 30,091 | 31,564 | 32,811 | 28,045 | 34,527 | 31,410 | 34,297 | 32,815 | |||||||||||||||||||||||
General and administrative | 21,463 | 15,834 | 17,425 | 19,387 | 22,222 | 20,644 | 19,984 | 18,331 | |||||||||||||||||||||||
Amortization of intangible assets | 786 | 786 | 408 | 374 | 375 | 373 | 398 | 480 | |||||||||||||||||||||||
Restructuring costs (recoveries), net | 5,766 | — | 539 | — | — | — | (165 | ) | — | ||||||||||||||||||||||
Total operating expenses | 82,296 | 73,409 | 74,493 | 70,979 | 80,336 | 74,581 | 76,584 | 74,580 | |||||||||||||||||||||||
Operating (loss) income | (352 | ) | 14,405 | (8,195 | ) | 1,115 | (2,688 | ) | 15,060 | (2,360 | ) | 9,687 | |||||||||||||||||||
Other expense, net | (1,727 | ) | (2,519 | ) | (1,439 | ) | (723 | ) | (1,620 | ) | (455 | ) | (357 | ) | (351 | ) | |||||||||||||||
(Loss) income before income taxes | (2,079 | ) | 11,886 | (9,634 | ) | 392 | (4,308 | ) | 14,605 | (2,717 | ) | 9,336 | |||||||||||||||||||
Provision for (benefit from) income taxes | 2,306 | 768 | (5,550 | ) | 561 | 761 | 365 | 622 | 440 | ||||||||||||||||||||||
Net (loss) income | $ | (4,385 | ) | $ | 11,118 | $ | (4,084 | ) | $ | (169 | ) | $ | (5,069 | ) | $ | 14,240 | $ | (3,339 | ) | $ | 8,896 | ||||||||||
Net (loss) income per share – basic and diluted | $ | (0.11 | ) | $ | 0.28 | $ | (0.10 | ) | $ | 0.00 | $ | (0.13 | ) | $ | 0.36 | $ | (0.09 | ) | $ | 0.23 | |||||||||||
Weighted-average common shares outstanding – basic | 39,439 | 39,231 | 39,635 | 39,387 | 39,234 | 39,133 | 39,119 | 39,099 | |||||||||||||||||||||||
Weighted-average common shares outstanding – diluted | 39,439 | 39,750 | 39,635 | 39,387 | 39,234 | 39,201 | 39,119 | 39,122 |
ITEM 9. | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE |
ITEM 9A. | CONTROLS AND PROCEDURES |
(1) | Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; |
(2) | Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and |
(3) | Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements. |
• | Risk Assessment - We did not have an effective risk assessment process. From a governance perspective, we historically did not have a formal process to identify, update and assess risks, including changes in our business practices, that could significantly impact our consolidated financial statements as well as the system of internal control over financial reporting. |
• | Control Environment - We did not maintain an effective control environment, which is the foundation for the discipline and structure necessary for effective internal control over financial reporting, as evidenced by: (i) an insufficient number of personnel appropriately qualified to perform control monitoring activities, including the recognition of the risks and complexities of our transactions and business operations, (ii) an insufficient number of personnel with an appropriate level of GAAP knowledge and experience or ongoing training in the application of GAAP commensurate with our financial reporting requirements, which resulted in erroneous judgments regarding the proper application of GAAP, and (iii) insufficient corporate involvement to adequately exercise appropriate oversight of accounting judgments and estimates. |
• | Control Activities - We did not have control activities that were designed and operating effectively, including controls over the inputs inherent in the Company’s revenue recognition models. Control activities that were historically in place (i) did not always address relevant risks, (ii) were sometimes performed with incomplete information and (iii) were not performed on all relevant transactions. In addition, the level of precision of the management review controls was not sufficient to identify all potential errors. |
• | Information and Communications - We did not implement appropriate information technology controls related to change management and access for certain information systems that are relevant to the preparation of the consolidated financial statements and our system of internal control over financial reporting. As a result of the material weaknesses identified, there is a possibility that the effectiveness of business process controls, which are dependent on the affected information systems or electronic data and financial reports generated from the affected information systems, may be adversely affected. |
• | Monitoring Activities - We did not maintain effective monitoring of controls related to the financial close and reporting process. |
ITEM 9B. | OTHER INFORMATION |
ITEM 10. | DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE |
ITEM 11. | EXECUTIVE COMPENSATION |
ITEM 12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS |
ITEM 13. | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE |
ITEM 14. | PRINCIPAL ACCOUNTANT FEES AND SERVICES |
ITEM 15. | EXHIBITS AND FINANCIAL STATEMENT SCHEDULES |
(a) 1. | FINANCIAL STATEMENTS |
(a) 3. | LISTING OF EXHIBITS. The list of exhibits, which are filed or furnished with this report or are incorporated herein by reference, is set forth in the Exhibit Index immediately preceding the exhibits and is incorporated herein by reference. |
By: | /s/ Louis Hernandez, Jr. |
Louis Hernandez, Jr. Chairman, Chief Executive Officer and President (Principal Executive Officer) | |
Date: | March 15, 2016 |
By: | /s/ Louis Hernandez, Jr. | By: | /s/ John W. Frederick | By: | /s/ Ryan H. Murray | |||
Louis Hernandez, Jr. Chairman, Chief Executive Officer and President (Principal Executive Officer) | John W. Frederick Executive Vice President, Chief Financial Officer and Chief Administrative Officer (Principal Financial Officer) | Ryan H. Murray Vice President of Finance and Chief Accounting Officer (Principal Accounting Officer) | ||||||
Date: | March 15, 2016 | Date: | March 15, 2016 | Date: | March 15, 2016 |
NAME | TITLE | DATE | ||
/s/ Louis Hernandez, Jr. | ||||
Louis Hernandez, Jr. | Chairman of the Board of Directors | March 15, 2016 | ||
/s/ Nancy Hawthorne | ||||
Nancy Hawthorne | Lead Director | March 15, 2016 | ||
/s/ Robert M. Bakish | ||||
Robert M. Bakish | Director | March 15, 2016 | ||
/s/ Paula E. Boggs | ||||
Paula E. Boggs | Director | March 15, 2016 | ||
/s/ Elizabeth M. Daley | ||||
Elizabeth M. Daley | Director | March 15, 2016 | ||
/s/ Youngme E. Moon | ||||
Youngme E. Moon | Director | March 15, 2016 | ||
/s/ John H. Park | ||||
John H. Park | Director | March 15, 2016 | ||
/s/ Peter Westley | ||||
Peter Westley | Director | March 15, 2016 | ||
Incorporated by Reference | ||||||||||
Exhibit No. | Description | Filed with this Form 10-K | Form or Schedule | SEC Filing Date | SEC File Number | |||||
3.1 | Certificate of Amendment of the Third Amended and Restated Certificate of Incorporation of the Registrant | 8-K | July 27, 2005 | 000-21174 | ||||||
3.2 | Third Amended and Restated Certificate of Incorporation of the Registrant | 10-Q | November 14, 2005 | 000-21174 | ||||||
3.3 | Amended and Restated By-Laws of the Registrant, as amended | 8-K | October 21, 2011 | 000-21174 | ||||||
4.1 | Specimen Certificate representing the Registrant’s Common Stock | S-1 | March 11, 1993* | 033-57796 | ||||||
4.2 | Rights Agreement, dated as of January 6, 2014, between Registrant and Computershare Trust Company, N.A. as Rights Agent, including all exhibits thereto | 8-K | January 7, 2014 | 000-21174 | ||||||
4.3 | Amended Certificate of Designations, Preferences and Rights of Series A Junior Participating Preferred Stock | 8-K | January 7, 2014 | 000-21174 | ||||||
10.1 | Network Drive at Northwest Park Office Lease dated as of November 20, 2009 between Avid Technology, Inc. and Netview 5 and 6 LLC (for premises at 65 Network Drive, Burlington, Massachusetts) | 8-K | November 25, 2009 | 000-21174 | ||||||
10.2 | Network Drive at Northwest Park Office Lease dated as of November 20, 2009 between Avid Technology, Inc. and Netview 1,2,3,4 & 9 LLC (for premises at 75 Network Drive, Burlington, Massachusetts) | 8-K | November 25, 2009 | 000-21174 | ||||||
#10.3 | 1993 Director Stock Option Plan, as amended | 10-K | February 29, 2008 | 000-21174 | ||||||
#10.4 | Second Amended and Restated 1996 Employee Stock Purchase Plan, as amended | 10-K | March 16, 2010 | 000-21174 | ||||||
#10.5 | Amendment No #2 to Second Amended and Restated 1996 Employee Stock Purchase Plan, as amended | 10-K | September 12, 2014 | 001-36254 | ||||||
#10.6 | 1997 Stock Option Plan | 10-K | March 27, 1998 | 000-21174 | ||||||
#10.7 | 1997 Stock Incentive Plan, as amended | 10-Q | May 14, 1997 | 000-21174 | ||||||
#10.8 | Second Amended and Restated Non-Qualified Deferred Compensation Plan | 10-K | February 29, 2008 | 000-21174 | ||||||
#10.9 | 1998 Stock Option Plan | 10-K | March 16, 2005 | 000-21174 | ||||||
#10.10 | Amended and Restated 1999 Stock Option Plan | 10-K | March 16, 2005 | 000-21174 | ||||||
#10.11 | Amended and Restated 2005 Stock Incentive Plan | 10-Q | August 7, 2008 | 000-21174 | ||||||
#10.12 | Amendment No. 1 to Amended and Restated 2005 Stock Incentive Plan | 10-K | September 12, 2014 | 001-36254 | ||||||
#10.13 | Form of Incentive Stock Option Agreement under the Registrant’s Amended and Restated 2005 Stock Incentive Plan | 10-K | September 12, 2014 | 001-36254 | ||||||
#10.14 | Form of Nonstatutory Stock Option Agreement under the Registrant’s Amended and Restated 2005 Stock Incentive Plan | 10-K | September 12, 2014 | 001-36254 |
#10.15 | Form of Nonstatutory Stock Option Agreement for Outside Directors under the Registrant’s Amended and Restated 2005 Stock Incentive Plan | 8-K | July 8, 2008 | 000-21174 | ||||||
#10.16 | Form of Restricted Stock Unit Agreement under the Registrant’s Amended and Restated 2005 Stock Incentive Plan | 8-K | July 8, 2008 | 000-21174 | ||||||
#10.17 | Form of Restricted Stock Unit Agreement for Outside Directors under the Registrant’s Amended and Restated 2005 Stock Incentive Plan | 8-K | July 8, 2008 | 000-21174 | ||||||
#10.18 | Form of Stock Option Agreement for UK Employees under the HM Revenue and Customs Approved Sub-Plan for UK Employees under the Registrant’s Amended and Restated 2005 Stock Incentive Plan | 8-K | July 8, 2008 | 000-21174 | ||||||
#10.19 | Form of Nonstatutory Stock Option Grant Terms and Conditions (under the 1997 Stock Incentive Plan) | 8-K | February 21, 2007 | 000-21174 | ||||||
#10.20 | Form of Incentive Stock Option Grant Terms and Conditions (under the 1997 Stock Incentive Plan) | 8-K | February 21, 2007 | 000-21174 | ||||||
#10.21 | 2014 Stock Incentive Plan | 10-K | March 16, 2015 | 001-36254 | ||||||
#10.22 | Form of Restricted Stock Unit Agreement under the Registrant’s Amended and Restated 2014 Stock Incentive Plan | 10-K | March 16, 2015 | 001-36254 | ||||||
#10.23 | Form of NSO Agreement under the Registrant’s 2014 Stock Incentive Plan | 10-K | March 16, 2015 | 001-36254 | ||||||
#10.24 | Form of ISO/NSO Agreement under the Registrant’s 2014 Stock Incentive Plan | 10-K | March 16, 2015 | 001-36254 | ||||||
#10.25 | Separation Agreement dated February 6, 2013 between Registrant and Gary G. Greenfield | 8-K/A | February 12, 2013 | 000-21174 | ||||||
#10.26 | Consulting and Separation Agreement dated April 22, 2013 between the Registrant and Kenneth A Sexton | 10-Q | September 12, 2014 | 001-36254 | ||||||
#10.27 | Amended and Restated Executive Employment Agreement dated December 22, 2010 between the Registrant and Christopher C. Gahagan | 10-K | March 14, 2011 | 000-21174 | ||||||
#10.28 | Form of Executive Officer Employment Letter as of January 1, 2012 | 10-K | February 29, 2012 | 000-21174 | ||||||
#10.29 | Summary of 2013 Annual Executive Incentive Program | 10-K | September 12, 2014 | 001-36254 | ||||||
#10.30 | Executive Employment Agreement dated February 11, 2013 between the Registrant and Louis Hernandez, Jr. | 8-K/A | February 12, 2013 | 000-21174 | ||||||
#10.31 | Amended and Restated Executive Employment Agreement dated April 22, 2013 between the Registrant and John Frederick | 10-Q | September 12, 2014 | 001-36254 | ||||||
#10.32 | 2013 Remediation Bonus Plan | 8-K | July 25, 2013 | 000-21174 | ||||||
#10.33 | Summary of 2014 Annual Executive Incentive Program | 10-Q | September 23, 2014 | 001-36254 | ||||||
10.34 | Agreement and Plan of Merger, dated as of April 12, 2015, by and among Orad Hi-Tech Solutions | 8-K | April 13, 2015 | 001-36254 | ||||||
10.35 | Form of Voting and Support Agreement between Avid Technology, Inc. and certain shareholders of Orad Hi-Tech Solutions Ltd. | 8-K | April 13, 2015 | 001-36254 |
10.36 | Financing Commitment Letter, dated April 12, 2015, by and between Avid Technology, Inc. and the Lenders specified therein | 8-K | April 13, 2015 | 001-36254 | ||||||
#10.37 | Summary of Avid Technology, Inc.’s 2015 Executive Bonus Plan | 10-Q | May 8, 2015 | 001-36254 | ||||||
10.38 | Indenture, dated as of June 15, 2015, between Avid Technology, Inc. and Wells Fargo Bank, National Association (including the form of 2.00% Convertible Senior Notes due 2020) | 8-K/A | June 16, 2015 | 001-36254 | ||||||
10.39 | Base capped call transaction confirmation, dated as of June 9, 2015, by and between Jefferies International Limited and Avid Technology, Inc., in reference to the 2.00% Convertible Senior Notes due 2020 | 8-K/A | June 16, 2015 | 001-36254 | ||||||
10.40 | Credit Agreement among Avid Technology, Inc., the Lenders named therein and KeyBank National Association dated June 22, 2015 | 8-K | June 23, 2015 | 001-36254 | ||||||
#10.41 | Second Amended and Restated 1996 Employee Stock Purchase Plan, as amended July 2015 | 10-Q | November 6, 2015 | 001-36254 | ||||||
10.42 | Financing Agreement, dated February 26, 2016, among Avid Technology, Inc., the Lenders named therein and Cerberus Business Finance, LLC. | X | ||||||||
21 | Subsidiaries of the Registrant | X | ||||||||
23.1 | Consent of Deloitte & Touche LLP | X | ||||||||
31.1 | Certification of Principal Executive Officer pursuant to Rules 13a-14 and 15d-14 under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | X | ||||||||
31.2 | Certification of Principal Financial Officer pursuant to Rules 13a-14 and 15d-14 under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | X | ||||||||
32.1 | Certifications pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | X | ||||||||
**100.INS | XBRL Instance Document | X | ||||||||
**100.SCH | XBRL Taxonomy Extension Schema Document | X | ||||||||
**100.CAL | XBRL Taxonomy Calculation Linkbase Document | X | ||||||||
**100.DEF | XBRL Taxonomy Definition Linkbase Document | X | ||||||||
**100.LAB | XBRL Taxonomy Label Linkbase Document | X | ||||||||
**100.PRE | XBRL Taxonomy Presentation Linkbase Document | X |
# | Management contract or compensatory plan identified pursuant to Item 15(a)3. | |
* | Effective date of Form S-1. | |
** | Pursuant to Rule 406T of Regulation S-T, XBRL (Extensible Business Reporting Language) information is deemed not filed or a part of a registration statement or prospectus for purposes of sections 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of section 18 of the Securities Exchange Act of 1934 and otherwise is not subject to liability under these sections. |
Section 1.01 | Definitions 2 |
Section 1.02 | Terms Generally 45 |
Section 1.03 | Certain Matters of Construction 46 |
Section 1.04 | Accounting and Other Terms 46 |
Section 1.05 | Time References 47 |
Section 2.01 | Commitments 48 |
Section 2.02 | Making the Loans 48 |
Section 2.03 | Repayment of Loans; Evidence of Debt 51 |
Section 2.04 | Interest 52 |
Section 2.05 | Reduction of Commitment; Prepayment of Loans 53 |
Section 2.06 | Fees 57 |
Section 2.07 | LIBOR Option. 58 |
Section 2.08 | Funding Losses 59 |
Section 2.09 | Taxes 60 |
Section 2.10 | Increased Costs and Reduced Return 62 |
Section 2.11 | Changes in Law; Impracticability or Illegality. 63 |
Section 2.12 | Mitigation Obligations; Replacement of Lenders 64 |
Section 4.01 | Payments; Computations and Statements 65 |
Section 4.02 | Sharing of Payments 66 |
Section 4.03 | Apportionment of Payments 67 |
Section 4.04 | Defaulting Lenders 67 |
Section 5.01 | Conditions Precedent to Effectiveness 69 |
Section 5.02 | Conditions Precedent to All Loans 72 |
Section 5.03 | Conditions Subsequent to Effectiveness 73 |
Section 6.01 | Representations and Warranties 74 |
Section 7.01 | Affirmative Covenants 82 |
Section 7.02 | Negative Covenants 92 |
Section 7.03 | Financial Covenants; Leverage Ratio 99 |
Section 8.01 | Cash Management Arrangements 99 |
Section 9.01 | Events of Default 101 |
Section 10.01 | Appointment 105 |
Section 10.02 | Nature of Duties; Delegation 106 |
Section 10.03 | Rights, Exculpation, Etc. 106 |
Section 10.04 | Reliance 107 |
Section 10.05 | Indemnification 107 |
Section 10.06 | Agents Individually 108 |
Section 10.07 | Successor Agent 108 |
Section 10.08 | Collateral Matters 108 |
Section 10.09 | Agency for Perfection 110 |
Section 10.10 | No Reliance on any Agent's Customer Identification Program. 111 |
Section 10.11 | No Third Party Beneficiaries 111 |
Section 10.12 | No Fiduciary Relationship 111 |
Section 10.13 | Reports; Confidentiality; Disclaimers 111 |
Section 10.14 | Collateral Custodian 112 |
Section 10.15 | [Reserved] 112 |
Section 10.16 | [Reserved]. 112 |
Section 10.17 | Collateral Agent May File Proofs of Claim 112 |
Section 11.01 | Guaranty 113 |
Section 11.02 | Guaranty Absolute 113 |
Section 11.03 | Waiver 114 |
Section 11.04 | Continuing Guaranty; Assignments 115 |
Section 11.05 | Subrogation 115 |
Section 11.06 | Contribution 115 |
Section 12.01 | Notices, Etc. 116 |
Section 12.02 | Amendments, Etc. 118 |
Section 12.03 | No Waiver; Remedies, Etc. 120 |
Section 12.04 | Expenses; Taxes; Attorneys' Fees 120 |
Section 12.05 | Right of Set-off 121 |
Section 12.06 | Severability 122 |
Section 12.07 | Assignments and Participations 122 |
Section 12.08 | Counterparts 126 |
Section 12.09 | GOVERNING LAW 126 |
Section 12.10 | CONSENT TO JURISDICTION; SERVICE OF PROCESS AND VENUE 126 |
Section 12.11 | WAIVER OF JURY TRIAL, ETC. 127 |
Section 12.12 | Consent by the Agents and Lenders 127 |
Section 12.13 | No Party Deemed Drafter 127 |
Section 12.14 | Reinstatement; Certain Payments 127 |
Section 12.15 | Indemnification; Limitation of Liability for Certain Damages 128 |
Section 12.16 | Records 129 |
Section 12.17 | Binding Effect 129 |
Section 12.18 | Highest Lawful Rate 130 |
Section 12.19 | Confidentiality 130 |
Section 12.20 | Public Disclosure 131 |
Section 12.21 | Integration 131 |
Section 12.22 | USA PATRIOT Act 132 |
Schedule 1.01(A) | Lenders and Lenders' Commitments |
Schedule 1.01(B) | Facilities |
Schedule 1.01(C) | Restructuring Costs/Non-Recurring Charges |
Schedule 1.01(D) | Specified Intercompany Loans |
Schedule 6.01(e)(i) | Capitalization; Subsidiaries |
Schedule 6.01(e)(ii) | Ownership Structure |
Schedule 6.01(f) | Litigation |
Schedule 6.01(i) | ERISA |
Schedule 6.01(l) | Nature of Business |
Schedule 6.01(q) | Environmental Matters |
Schedule 6.01(r) | Insurance |
Schedule 6.01(u) | Intellectual Property |
Schedule 6.01(v) | Material Contracts |
Schedule 7.02(a) | Existing Liens |
Schedule 7.02(b) | Existing Indebtedness |
Schedule 7.02(e) | Existing Investments |
Schedule 7.02(k) | Limitations on Dividends and Other Payment Restrictions |
Schedule 8.01 | Cash Management Accounts |
Fiscal Quarter End | Leverage Ratio |
June 30, 2016 | 4.35:1.00 |
September 30, 2016 | 5.40:1.00 |
December 31, 2016 | 4.20:1.00 |
March 31, 2017 | 3.50:1.00 |
June 30, 2017 | 3.50:1.00 |
September 30, 2017 | 3.50:1.00 |
December 31, 2017 | 3.30:1.00 |
March 31, 2018 | 3.00:1.00 |
June 30, 2018 | 3.00:1.00 |
September 30, 2018 | 3.00:1.00 |
December 31, 2018 | 3.00:1.00 |
March 31, 2019 and the last day of each fiscal quarter ended thereafter | 2.50:1.00 |
BORROWER: AVID TECHNOLOGY, INC. | ||
By: | /s/ Tony Callini | |
Name: Tony Callini | ||
Title: Senior Vice President of Finance | ||
GUARANTOR: AVID TECHNOLOGY WORLDWIDE, INC. | ||
By: | /s/ Jason Duva | |
Name: Jason Duva | ||
Title: Secretary |
ADMINISTRATIVE AGENT AND COLLATERAL AGENT: | ||
CERBERUS BUSINESS FINANCE, LLC | ||
By: | /s/ Daniel Wolf | |
Name: Daniel Wolf | ||
Title: President | ||
LENDERS: | ||
CERBERUS LEVERED LOAN OPPORTUNITIES FUND III, L.P. | ||
By: Cerberus Levered Opportunities III GP, LLC | ||
Its: General Partner | ||
By: | /s/ Daniel E. Wolf | |
Name: Daniel E. Wolf | ||
Title: Senior Managing Director | ||
CERBERUS NJ CREDIT OPPORTUNITIES FUND, L.P. | ||
By: Cerberus NJ Credit Opportunities GP, LLC | ||
Its: General Partner | ||
By: | /s/ Daniel E. Wolf | |
Name: Daniel E. Wolf | ||
Title: Senior Managing Director | ||
CERBERUS ASRS HOLDINGS LLC | ||
By: | /s/ Daniel E. Wolf | |
Name: Daniel E. Wolf | ||
Title: Vice President |
CERBERUS ICQ LEVERED LOAN OPPORTUNITIES FUND, L.P. | ||
By: Cerberus ICQ Levered Opportunities GP, LLC | ||
Its: General Partner | ||
By: | /s/ Daniel E. Wolf | |
Name: Daniel E. Wolf | ||
Title: Senior Managing Director | ||
CERBERUS KRS LEVERED LOAN OPPORTUNITIES FUND, L.P. | ||
By: Cerberus KRS Levered Opportunities GP, LLC | ||
Its: General Partner | ||
By: | /s/ Daniel E. Wolf | |
Name: Daniel E. Wolf | ||
Title: Senior Managing Director | ||
CERBERUS PSERS LEVERED LOAN OPPORTUNITIES FUND, L.P. | ||
By: Cerberus PSERS Levered Opportunities GP, LLC | ||
Its: General Partner | ||
By: | /s/ Daniel E. Wolf | |
Name: Daniel E. Wolf | ||
Title: Senior Managing Director |
1. | I have reviewed this Annual Report on Form 10-K of Avid Technology, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. | The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
Date: | March 15, 2016 | /s/ Louis Hernandez, Jr. | ||
Louis Hernandez, Jr. | ||||
Chairman, Chief Executive Officer and President (Principal Executive Officer) |
1. | I have reviewed this Annual Report on Form 10-K of Avid Technology, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. | The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
Date: | March 15, 2016 | /s/ John W. Frederick | ||
John W. Frederick | ||||
Executive Vice President, Chief Financial Officer | ||||
and Chief Administrative Officer (Principal Financial Officer) |
Date: | March 15, 2016 | /s/ Louis Hernandez, Jr. | |
Louis Hernandez, Jr. | |||
Chairman, Chief Executive Officer and President | |||
(Principal Executive Officer) |
Date: | March 15, 2016 | /s/ John W. Frederick | |
John W. Frederick | |||
Executive Vice President, Chief Financial | |||
Officer and Chief Administrative Officer (Principal Financial Officer) |
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M7]FW]HE=1\.^+/"FK7>A^(-&O/*^&LL#SZ=J=E
DOCUMENT AND ENTITY INFORMATION Document - USD ($) |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2015 |
Mar. 10, 2016 |
Jun. 30, 2015 |
|
Entity [Abstract] | |||
Entity Registrant Name | Avid Technology, Inc. | ||
Entity Central Index Key | 0000896841 | ||
Current Fiscal Year End Date | --12-31 | ||
Entity Well-known Seasoned Issuer | No | ||
Entity Voluntary Filers | No | ||
Entity Current Reporting Status | Yes | ||
Entity Filer Category | Accelerated Filer | ||
Entity Public Float | $ 510,363,334 | ||
Entity Common Stock, Shares Outstanding | 39,629,593 | ||
Document Fiscal Year Focus | 2015 | ||
Document Fiscal Period Focus | FY | ||
Document Type | 10-K | ||
Amendment Flag | false | ||
Document Period End Date | Dec. 31, 2015 |
CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) shares in Thousands, $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2015 |
Dec. 31, 2014 |
Dec. 31, 2013 |
|
Net revenues: | |||
Products | $ 336,371 | $ 378,627 | $ 395,531 |
Services | 169,224 | 151,624 | 167,881 |
Total net revenues | 505,595 | 530,251 | 563,412 |
Cost of revenues: | |||
Products | 131,881 | 143,765 | 159,264 |
Services | 61,501 | 60,656 | 63,177 |
Amortization of intangible assets | 4,063 | 50 | 1,468 |
Total cost of revenues | 197,445 | 204,471 | 223,909 |
Gross profit | 308,150 | 325,780 | 339,503 |
Operating expenses: | |||
Research and development | 95,898 | 90,390 | 95,249 |
Marketing and selling | 122,511 | 133,049 | 133,890 |
General and administrative | 74,109 | 81,181 | 77,578 |
Amortization of intangible assets | 2,354 | 1,626 | 2,648 |
Restructuring costs (recoveries), net | 6,305 | (165) | 5,370 |
Total operating expenses | 301,177 | 306,081 | 314,735 |
Operating income | 6,973 | 19,699 | 24,768 |
Interest income | 113 | 126 | 555 |
Interest expense | (6,346) | (1,771) | (1,574) |
Other (expense) income, net | (175) | (1,138) | 343 |
Income before income taxes | 565 | 16,916 | 24,092 |
(Benefit) provision for income taxes | (1,915) | 2,188 | 2,939 |
Net income | $ 2,480 | $ 14,728 | $ 21,153 |
Net income per common share - basic and diluted | $ 0.06 | $ 0.38 | $ 0.54 |
Weighted-average common shares outstanding - basic | 39,423 | 39,147 | 39,044 |
Weighted-average common shares outstanding - diluted | 40,380 | 39,267 | 39,070 |
CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME Statement - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2015 |
Dec. 31, 2014 |
Dec. 31, 2013 |
|
Net income | $ 2,480 | $ 14,728 | $ 21,153 |
Other comprehensive loss: | |||
Foreign currency translation adjustments | (6,566) | (7,540) | (1,717) |
Comprehensive (loss) income | $ (4,086) | $ 7,188 | $ 19,436 |
BUSINESS (Notes) |
12 Months Ended |
---|---|
Dec. 31, 2015 | |
ORGANIZATION AND OPERATIONS | BUSINESS Description of Business Avid Technology, Inc. (“Avid” or the “Company”) provides technology solutions that enable the creation, distribution and monetization of audio and video content. Specifically, the Company develops, markets, sells and supports software and hardware for digital media content production, management and distribution. Digital media are video, audio or graphic elements in which the image, sound or picture is recorded and stored as digital values, as opposed to analog or tape-based signals. The Company’s products are used in production and post-production facilities; film studios; network, affiliate, independent and cable television stations; recording studios; live-sound performance venues; advertising agencies; government and educational institutions; corporate communication departments; and by independent video and audio creative professionals, as well as aspiring professionals and enthusiasts. Projects produced using Avid’s products include feature films, television programming, live events, news broadcasts, commercials, music, video and other digital media content. Management Plans The Company has generally funded operations in recent years through the use of existing cash balances, supplemented from time to time with borrowings under credit facilities. Cash used in operating activities aggregated $34.0 million for the year ended December 31, 2015. In the first quarter of 2016, the Company commenced restructuring actions that are part of a broad restructuring plan encompassing a series of measures intended to allow the Company to more efficiently operate in a leaner, and more directed cost structure. These include reductions in the Company’s workforce, facilities consolidation, transferring certain business processes to lower cost regions, and reducing other third-party services costs. In connection with this restructuring plan, the Company expects to incur incremental cash expenditures of approximately $25 million relating to termination benefits, facility costs, employee overlap expenses and related actions. The Company anticipates that the restructuring plan will be substantially complete by the end of the second quarter of 2017 and when fully implemented, is expected to result in annualized costs savings of appropriately $68 million. In connection with the cost efficiency program, on February 26, 2016, the Company entered into a term loan with an aggregate principal amount of $100 million and up to a maximum of $5 million in revolving credit (collectively, the “Financing Agreement”). All outstanding loans under the Financing Agreement will become due and payable in February 2021, or in May 2020 if the $125.0 million in outstanding principal from the 2.00% convertible senior notes due June 15, 2020 have not been repaid or refinanced. The Financing Agreement requires the Company to comply with a financial statement covenant that stipulates a maximum leverage ratio commencing in June 30, 2016. Proceeds from the Financing Agreement will be used to replace the existing $35 million revolving credit facility, finance the Company’s efficiency program and other initiatives, and provide operating flexibility throughout the remainder of the transformation in this period of heightened market volatility. The Company estimates that after paying for both debt issuance costs and the efficiency program, the new financing will provide approximately $70 million of available liquidity, about half of which replaces the existing revolving credit facility with the remainder providing incremental liquidity to fund operations. Concurrent with entering into the Financing Agreement, the Company terminated its existing revolving credit agreement, and repaid all outstanding borrowings under the revolving credit agreement. There were no penalties paid by the Company in connection with the termination of the revolving credit agreement. The Company’s principal sources of liquidity include cash and cash equivalents totaling $17.9 million at December 31, 2015 and the proceeds from the Financing Agreement. The Company’s cash requirements vary depending on factors such as the growth of the business, changes in working capital, capital expenditures, acquisitions of businesses or technologies and obligations under restructuring programs. Management expects to operate the business and execute its strategic initiatives principally with funds generated from operations and the proceeds from the Financing Agreement. Management anticipates that the Company will have sufficient internal and external sources of liquidity to fund operations and anticipated working capital and other expected cash needs for at least the next twelve months as well as for the foreseeable future. |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Summary of Significant Accounting Policies (Notes) |
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Significant Accounting Policies [Text Block] | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. Intercompany balances and transactions have been eliminated. Basis of Presentation The Company’s preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reported periods. Actual results could differ from the Company’s estimates. Revenue Recognition General The Company commences revenue recognition when persuasive evidence of an arrangement exists, delivery has occurred, the sales price is fixed or determinable and collection is reasonably assured. Generally, the products the Company sells do not require significant production, modification or customization. Installation of the Company’s products is generally routine, consists of implementation and configuration and does not have to be performed by the Company. At the time of a sales transaction, the Company makes an assessment of the collectability of the amount due from the customer. Revenues are recognized only if it is reasonably assured that collection will occur. When making this assessment, the Company considers customer credit-worthiness and historical payment experience. If it is determined from the outset of the arrangement that collection is not reasonably assured, revenues are recognized on a cash basis, provided that all other revenue recognition criteria are satisfied. At the outset of the arrangement, the Company also assesses whether the fee associated with the order is fixed or determinable and free of contingencies or significant uncertainties. When assessing whether the fee is fixed or determinable, the Company considers the payment terms of the transaction, the Company’s collection experience in similar transactions without making concessions, and the Company’s involvement, if any, in third-party financing transactions, among other factors. If the fee is not fixed or determinable, revenues are recognized only as payments become due from the customer, provided that all other revenue recognition criteria are met. If a significant portion of the fee is due after the Company’s normal payment terms, the Company evaluates whether the Company has sufficient history of successfully collecting past transactions with similar terms without offering concessions. If that collection history is sufficient, revenue recognition commences, upon delivery of the products, assuming all other revenue recognition criteria are satisfied. If the Company was to make different judgments or assumptions about any of these matters, it could cause a material increase or decrease in the amount of revenues reported in a particular period. The Company often receives multiple purchase orders or contracts from a single customer or a group of related customers that are evaluated to determine if they are, in effect, part of a single arrangement. In situations when the Company has concluded that two or more orders with the same customer are so closely related that they are, in effect, parts of a single arrangement, the Company accounts for those orders as a single arrangement for revenue recognition purposes. In other circumstances, when the Company has concluded that two or more orders with the same customer are independent buying decisions, such as an earlier purchase of a product and a subsequent purchase of a software upgrade or maintenance contract, the Company accounts for those orders as separate arrangements for revenue recognition purposes. For many of the Company’s products, there has been an ongoing practice of Avid making available at no charge to customers minor feature and compatibility enhancements as well as bug fixes on a when-and-if-available basis (collectively “Software Updates”), for a period of time after initial sales to end users. The implicit obligation to make such Software Updates available to customers over a period of time represents implied post-contract customer support, which is deemed to be a deliverable in each arrangement and is accounted for as a separate element (“Implied Maintenance Release PCS”). Over the course of the last two years, in connection with a strategic initiative to increase support and other recurring revenue streams, the Company has taken a number of steps to eliminate the longstanding practice of providing Implied Maintenance Release PCS for the Media Composer, Pro Tools and Sibelius product lines. On Media Composer 8.0 in particular, which was released in May 2014, management has (i) clearly communicated a policy of no longer providing any Software Updates or other support to customers that are not covered under a paid support plan and (ii) implemented robust digital rights management tools to enforce the policy. With the new policy and technology for Media Composer 8.0 in place, combined with management’s intent to continue to adhere to the policy, management concluded in the third quarter of 2015 that Implied Maintenance Release PCS for Media Composer 8.0 transactions no longer exists. As a result of the conclusion that Implied Maintenance Release PCS on Media Composer 8.0 has ended, revenue and net income for the twelve months ended December 31, 2015 increased by $13.0 million, reflecting the recognition of orders received after the launch of Media Composer 8.0 that would have qualified for earlier recognition using the residual method of accounting. In addition, as the elimination of Implied Maintenance Release PCS also resulted in the accelerated recognition of maintenance and product revenues that were previously being recognized over the expected period of Implied Maintenance Release PCS rather than the contractual maintenance period, the change in the estimated amortization period of transactions being recognized on a ratable basis resulted in an additional $9.5 million of revenue during the twelve months ended December 31, 2015. Management also concluded in the fourth quarter of 2015 that Implied Maintenance Release PCS on Sibelius 8.0 had ended, which did not have a significant impact on revenue recognition for the twelve months ended December 31, 2015. Management will continue to evaluate the judgment of whether Implied Maintenance Release PCS exists on each product line and version. If and when management concludes Implied Maintenance Release PCS no longer exists for other product lines or versions in future quarters, software revenue related to orders affected will be accelerated and prospective revenue recognition on new product orders will be recognized upfront, assuming all other revenue recognition criteria are met and vendor specific objective evidence (“VSOE”) of fair value exists for all undelivered elements. The Company enters into certain contractual arrangements that have multiple elements, one or more of which may be delivered subsequent to the delivery of other elements. These multiple-deliverable arrangements may include products, support, training, professional services and Implied Maintenance Release PCS. For these multiple-element arrangements, the Company allocates revenue to each deliverable of the arrangement based on the relative selling prices of the deliverables. In such circumstances, the Company first determines the selling price of each deliverable based on (i) VSOE of fair value if that exists; (ii) third-party evidence of selling price (“TPE”), when VSOE does not exist; or (iii) best estimate of the selling price (“BESP”), when neither VSOE nor TPE exists. Revenue is then allocated to the non-software deliverables as a group and to the software deliverables as a group using the relative selling prices of each of the deliverables in the arrangement based on the selling price hierarchy. The Company’s process for determining BESP for deliverables for which VSOE or TPE does not exist involves significant management judgment. In determining BESP, the Company considers a number of data points, including:
In determining a BESP for Implied Maintenance Release PCS, which the Company does not sell separately, the Company considers (i) the service period for the Implied Maintenance Release PCS, (ii) the differential in value of the Implied Maintenance Release PCS deliverable compared to a full support contract, (iii) the likely list price that would have resulted from the Company’s established pricing practices had the deliverable been offered separately, and (iv) the prices a customer would likely be willing to pay. The Company estimates the service period of Implied Maintenance Release PCS based on the length of time the product version purchased by the customer is planned to be supported with Software Updates. If facts and circumstances indicate that the original service period of Implied Maintenance Release PCS for a product has changed significantly after original revenue recognition has commenced, the Company will modify the remaining estimated service period accordingly and recognize the then-remaining deferred revenue balance over the revised service period. The Company has established VSOE of fair value for all professional services and training and for some of the Company’s support offerings. The Company’s policy for establishing VSOE of fair value consists of evaluating standalone sales, where available, to determine if a substantial portion of the transactions fall within a reasonable range. If a sufficient volume of standalone sales exist and the standalone pricing for a substantial portion of the transactions falls within a reasonable range, management concludes that VSOE of fair value exists. In accordance with ASU No. 2009-14, the Company excludes from the scope of software revenue recognition requirements the Company’s sales of tangible products that contain both software and non-software components that function together to deliver the essential functionality of the tangible products. The Company adopted ASU No. 2009-13 and ASU No. 2009-14 prospectively on January 1, 2011 for new and materially modified arrangements originating after December 31, 2010. Prior to the Company’s adoption of ASU No. 2009-14, the Company primarily recognized revenues using the revenue recognition criteria of Accounting Standards Codification, or ASC, Subtopic 985-605, Software-Revenue Recognition. As a result of the Company’s adoption of ASU No. 2009-14 on January 1, 2011, a majority of the Company’s products are now considered non-software elements under GAAP, which excludes them from the scope of ASC Subtopic 985-605 and includes them within the scope of ASC Topic 605, Revenue Recognition. Because the Company had not been able to establish VSOE of fair value for Implied Maintenance Release PCS, as described further below, substantially all revenue arrangements prior to January 1, 2011 were recognized on a ratable basis over the service period of Implied Maintenance Release PCS. Subsequent to January 1, 2011 and the adoption of ASU No. 2009-14, the Company determines a relative selling price for all elements of the arrangement through the use of BESP, as VSOE and TPE are typically not available, resulting in revenue recognition upon delivery of arrangement consideration attributable to product revenue, provided all other criteria for revenue recognition are met, and revenue recognition of Implied Maintenance Release PCS and other service and support elements over time as services are rendered. Revenue Recognition of Non-Software Deliverables Revenue from products that are considered non-software deliverables is recognized upon delivery of the product to the customer. Products are considered delivered to the customer once they have been shipped and title and risk of loss has been transferred. For most of the Company’s product sales, these criteria are met at the time the product is shipped. Revenue from support that is considered a non-software deliverable is initially deferred and is recognized ratably over the contractual period of the arrangement, which is generally 12 months. Professional services and training services are typically sold to customers on a time and materials basis. Revenue from professional services and training services that are considered non-software deliverables is recognized for these deliverables as services are provided to the customer. Revenue for Implied Maintenance Release PCS that is considered a non-software deliverable is recognized ratably over the service period of Implied Maintenance Release PCS, which ranges from 1 to 8 years. Revenue Recognition of Software Deliverables The Company recognizes the following types of elements sold using software revenue recognition guidance: (i) software products and software upgrades, when the software sold in a customer arrangement is more than incidental to the arrangement as a whole and the product does not contain hardware that functions with the software to provide essential functionality, (ii) initial support contracts where the underlying product being supported is considered to be a software deliverable, (iii) support contract renewals, and (iv) professional services and training that relate to deliverables considered to be software deliverables. Because the Company does not have VSOE of the fair value of its software products, the Company is permitted to account for its typical customer arrangements that include multiple elements using the residual method. Under the residual method, the VSOE of fair value of the undelivered elements (which could include support, professional services or training, or any combination thereof) is deferred and the remaining portion of the total arrangement fee is recognized as revenue for the delivered elements. If evidence of the VSOE of fair value of one or more undelivered elements does not exist, revenues are deferred and recognized when delivery of those elements occurs or when VSOE of fair value can be established. VSOE of fair value is typically based on the price charged when the element is sold separately to customers. The Company is unable to use the residual method to recognize revenues for many arrangements that include products that are software deliverables under GAAP since VSOE of fair value does not exist for Implied Maintenance Release PCS elements, which are included in many of the Company’s arrangements. For software products that include Implied Maintenance Release PCS, an element for which VSOE of fair value does not exist, revenue for the entire arrangement fee, which could include combinations of product, professional services, training and support, is recognized ratably as a group over the longest service period of any deliverable in the arrangement, with recognition commencing on the date delivery has occurred for all deliverables in the arrangement (or begins to occur in the case of professional services, training and support). Standalone sales of support contracts are recognized ratably over the service period of the product being supported. From time to time, the Company offers certain customers free upgrades or specified future products or enhancements. When a software deliverable arrangement contains an Implied Maintenance Release PCS deliverable, revenue recognition of the entire arrangement will only commence when any free upgrades or specified future products or enhancements have been delivered, assuming all other products in the arrangement have been delivered and all services, if any, have commenced. Other Revenue Recognition Policies In a limited number of arrangements, the professional services and training to be delivered are considered essential to the functionality of the Company’s software products. If services sold in an arrangement are deemed to be essential to the functionality of the software products, the arrangement is accounted for using contract accounting. As the Company has concluded that it cannot reliably estimate its contract costs, the Company uses the completed contract method of contract accounting. The completed contract method of accounting defers all revenue and costs until the date that the products have been delivered and professional services, exclusive of post-contract customer support, have been completed. Deferred costs related to fully deferred contracts are recorded as a component of inventories in the consolidated balance sheet, and generally all other costs of sales are recognized when revenue recognition commences. The Company records as revenues all amounts billed to customers for shipping and handling costs and records its actual shipping costs as a component of cost of revenues. Reimbursements received from customers for out-of-pocket expenses are recorded as revenues, with related costs recorded as cost of revenues. The Company presents revenues net of any taxes collected from customers and remitted to government authorities. In the consolidated statements of operations, the Company classifies revenues as product revenues or services revenues. For multiple-element arrangements that include both product and service elements, including Implied Maintenance Release PCS, the Company evaluates available indicators of fair value and applies its judgment to reasonably classify the arrangement fee between product revenues and services revenues. The amount of multiple-element arrangement fees classified as product and service revenues based on management estimates of fair value when VSOE of fair value for all elements of an arrangement does not exist could differ from amounts classified as product and service revenues if VSOE of fair value for all elements existed. Allowance for Sales Returns and Exchanges The Company maintains allowances for estimated potential sales returns and exchanges from its customers. The Company records a provision for estimated returns and other allowances as a reduction of revenues in the same period that related revenues are recorded based on historical experience and specific customer analysis. Use of management estimates is required in connection with establishing and maintaining a sales allowance for expected returns and other credits. If actual returns differ from the estimates, additional allowances could be required. The following table sets forth the activity in the allowance for sales returns and exchanges for the years ended December 31, 2015, 2014 and 2013 (in thousands):
The allowance for sales returns and exchanges, which is recorded as a reduction to gross accounts receivable, reflects an estimate of amounts invoiced that will not be collected, as well as other allowances and credits that have been or are expected to offset the trade receivables. Since many of the Company’s transactions require some or all of amounts invoiced to be recorded in deferred revenue under GAAP due to revenue recognition considerations, the Company has recorded reductions to deferred revenue of $3.2 million, $3.7 million and $6.1 million as of December 31, 2015, 2014 and 2013, respectively, to eliminate the estimated deferred revenue attributable to transactions already provided for by the sales, returns and exchanges allowance. Allowances for Doubtful Accounts The Company maintains allowances for estimated losses from bad debt resulting from the inability of its customers to make required payments for products or services. When evaluating the adequacy of the allowances, the Company analyzes accounts receivable balances, historical bad debt experience, customer concentrations, customer credit worthiness and current economic trends. To date, actual bad debts have not differed materially from management’s estimates. The following table sets forth the activity in the allowance for doubtful accounts for the years ended December 31, 2015, 2014 and 2013 (in thousands):
Translation of Foreign Currencies The functional currency of each of the Company’s foreign subsidiaries is the local currency, except for the Irish manufacturing branch whose functional currency is the U.S. dollar due to the extensive interrelationship of the operations of the Irish branch and the U.S. parent and the high volume of intercompany transactions between that branch and the parent. The assets and liabilities of the subsidiaries whose functional currencies are other than the U.S. dollar are translated into U.S. dollars at the current exchange rate in effect at the balance sheet date. Income and expense items for these entities are translated using rates that approximate those in effect during the period. Cumulative translation adjustments are included in accumulated other comprehensive income (loss), which is reflected as a separate component of stockholders’ deficit. The Company does not record tax provisions or benefits for the net changes in the foreign currency translation adjustment as the Company intends to permanently reinvest undistributed earnings in its foreign subsidiaries. The U.S. parent company and its Irish manufacturing branch, both of whose functional currency is the U.S. dollar, carry certain monetary assets and liabilities denominated in currencies other than the U.S. dollar. These assets and liabilities typically include cash, accounts receivable and intercompany operating balances denominated in foreign currencies. These assets and liabilities are remeasured into the U.S. dollar at the current exchange rate in effect at the balance sheet date. Foreign currency transaction and remeasurement gains and losses are included within marketing and selling expenses in the results of operations. See Note E for the net foreign exchange gains and losses recorded in the Company’s statements of operations during the years ended December 31, 2015, 2014 and 2013 that resulted from the gains and losses on Company’s foreign currency contracts and the revaluation of the related hedged items. The U.S. parent company and various other wholly owned subsidiaries have long-term intercompany loan balances denominated in foreign currencies that are remeasured into the U.S. dollar at the current exchange rate in effect at the balance sheet date. Such loan balances are not expected to be settled in the foreseeable future. Any gains and losses relating to these loans are included in the accumulated other comprehensive income (loss), which is reflected as a separate component of stockholders’ deficit. Cash, Cash Equivalents and Marketable Securities The Company measures cash equivalents and marketable securities at fair value on a recurring basis. The cash equivalents and market securities consist primarily of money market investments, mutual funds and insurance contracts held in deferred compensation plans. The money market investments and mutual funds held in the Company’s deferred compensation plan in the U.S. are reported at fair value within other current assets using quoted market prices with the gains and losses included as other (expense) income in the Company’s statement of operations. The insurance contracts held in the deferred compensation plans for employees in Israel and Germany are reported at fair value within other long term assets using other observable inputs. Other than the investments held in the Company’s deferred compensation plans, the Company held no marketable securities at December 31, 2015 or 2014. Amortization or accretion of premium or discount is included in interest income (expense) in the results of operations. Concentration of Credit Risk Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash and cash equivalents, foreign currency contracts and accounts receivable. The Company places its cash and cash equivalents with financial institutions that management believes to be of high credit quality, and, generally, there are no significant concentrations in any one issuer. Concentrations of credit risk with respect to trade receivables are limited due to the large number of customers that make up the Company’s customer base and their dispersion across different regions. No individual customer accounted for 10% or more of the Company’s net revenues or net accounts receivable in the periods presented. Foreign Currency Risk The Company has significant international operations and, therefore, the Company’s revenues, earnings, cash flows and financial position are exposed to foreign currency risk from foreign-currency-denominated receivables, payables, sales and expense transactions, and net investments in foreign operations. The Company derives more than half of its revenues from customers outside the United States. This business is, for the most part, transacted through international subsidiaries and generally in the currency of the end-user customers. Therefore, the Company is exposed to the risks that changes in foreign currency could adversely affect its revenues, net income, cash flow and financial position. The Company uses derivatives in the form of foreign currency contracts to manage its short-term exposures to fluctuations in the foreign currency exchange rates that exist as part of its ongoing international business operations. The Company does not enter into any derivative instruments for trading or speculative purposes. The Company records all foreign currency contract derivatives on the balance sheet at fair value. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative, whether the Company has elected to designate a derivative in a hedging relationship and apply hedge accounting, and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting. Derivatives designated and qualifying as hedges of the exposure to changes in the fair value of an asset, liability or firm commitment attributable to a particular risk are considered fair value hedges. Derivatives designated and qualifying as hedges of the exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges. Derivatives may also be designated as hedges of the foreign currency exposure of a net investment in a foreign operation. Hedge accounting generally provides for the matching of the timing of gain or loss recognition on the hedging instrument with the recognition of the changes in the fair value of the hedged asset or liability that are attributable to the hedged risk in a fair value hedge or the earnings effect of the hedged forecasted transactions in a cash flow hedge. Under hedge accounting, the determination of hedge effectiveness is dependent upon whether the gain or loss on the hedging derivative is highly effective in offsetting the gain or loss in the value of the item being hedged. The Company has not accounted for any foreign currency contracts as hedges in the periods presented. Inventories Inventories are stated at the lower of cost (determined on a first-in, first-out basis) or market value. Management regularly reviews inventory quantities on hand and writes down inventory to its realizable value to reflect estimated obsolescence or lack of marketability based on assumptions about future inventory demand and market conditions. Inventory in the digital-media market, including the Company’s inventory, is subject to rapid technological change or obsolescence; therefore, utilization of existing inventory may differ from the Company’s estimates. Property and Equipment Property and equipment is recorded at cost and depreciated using the straight-line method over the estimated useful life of the asset. The Company typically depreciates its property and equipment using the following minimum and maximum useful lives:
The Company capitalizes certain development costs incurred in connection with its internal use software. Costs incurred in the preliminary stages of development are expensed as incurred. Once an application has reached the development stage, internal and external costs, if direct, are capitalized until the software is substantially complete and ready for its intended use. Capitalized costs are recorded as part of property and equipment. Maintenance and training costs are expensed as incurred. Internal use software is amortized on a straight line basis over its estimated useful life, generally three years. Leasehold improvements are amortized over the shorter of the useful life of the improvement or the remaining term of the lease. Expenditures for maintenance and repairs are expensed as incurred. Upon retirement or other disposition of assets, the cost and related accumulated depreciation are eliminated from the accounts and the resulting gain or loss is reflected in other (expense) income in the results of operations. Acquisition-Related Intangible Assets and Goodwill Acquisition-related intangible assets consist of customer relationships, developed technology, trade names and non-compete agreements. These assets are determined to have either finite or indefinite lives. For finite-lived intangible assets amortization is straight-line over the estimated useful lives of such assets, which are generally two years to twelve years. Straight-line amortization is used because the Company cannot reliably determine a discernible pattern over which the economic benefits would be realized. The Company does not have any indefinite-lived intangible assets. Intangible assets are tested for impairment when events and circumstances indicate there is an impairment. The impairment test involves comparing the sum of undiscounted cash flows to the carrying value as of the measurement date. Impairment occurs when the carrying value of the assets exceeds the sum of undiscounted cash flows. Impairment is then measured as the difference between the carrying value and fair value determined using a discounted cash flow method. In estimating the fair value using a discounted cash flow method, the Company uses assumptions that include forecast revenues, gross margins, operating profit margins, growth rates and long term discount rates, all of which require significant judgment by management. Changes to these assumptions could affect the estimated fair value of the intangible asset and could result in an impairment charge in future. The Company performs its annual and interim goodwill impairment tests when it is more likely than not that a goodwill impairment exists. The Company has concluded it has one reporting unit and the annual measurement date is October 31, 2015. Long-Lived Assets The Company periodically evaluates its long-lived assets for events and circumstances that indicate a potential impairment. A long-lived asset is assessed for impairment when the undiscounted expected future cash flows derived from that asset are less than its carrying value. The cash flows used for this analysis take into consideration a number of factors including past operating results, budgets and economic projections, market trends and product development cycles. The amount of any impairment would be equal to the difference between the estimated fair value of the asset, based on a discounted cash flow analysis, and its carrying value. Advertising Expenses All advertising costs are expensed as incurred and are classified as marketing and selling expenses. Advertising expenses were not material in the periods presented. Research and Development Costs Research and development costs are expensed as incurred. Development costs for software to be sold that are incurred subsequent to the establishment of technological feasibility, but prior to the general release of the product, are capitalized. Upon general release, these costs are amortized using the straight-line method over the expected life of the related products, generally 12 to 36 months. The straight-line method generally results in approximately the same amount of expense as that calculated using the ratio that current period gross product revenues bear to total anticipated gross product revenues. The Company periodically evaluates the assets, considering a number of business and economic factors, to determine if an impairment exists. No amounts have been capitalized during 2015, 2014, and 2013 as the costs incurred subsequent to the establishment of technological feasibility have not been material. Income Taxes The Company accounts for income taxes using an asset and liability approach that requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the Company’s financial statements or tax returns. The Company records deferred tax assets and liabilities based on the net tax effects of tax credits, operating loss carryforwards and temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes compared to the amounts used for income tax purposes. Deferred tax assets are regularly reviewed for recoverability with consideration for such factors as historical losses, projected future taxable income and the expected timing of the reversals of existing temporary differences. The Company is required to record a valuation allowance when it is more likely than not that some portion or all of the deferred tax assets will not be realized. The Company accounts for uncertainty in income taxes recognized in its financial statements by applying a two-step process to determine the amount of tax benefit to be recognized. First, the tax position must be evaluated to determine the likelihood that it will be sustained upon examination by the taxing authorities, based on the technical merits of the position. If the tax position is deemed more-likely-than-not to be sustained, the tax position is then assessed to determine the amount of benefit to recognize in the financial statements. The amount of the benefit that may be recognized is the largest amount that has a greater than 50% likelihood of being realized upon ultimate settlement. The provision for income taxes includes the effects of any resulting tax reserves (“unrecognized tax benefits”) that are considered appropriate as well as the related net interest and penalties. Accounting for Stock-Based Compensation The Company’s stock-based employee compensation plans allow the Company to grant stock awards, options, or other equity-based instruments, or a combination thereof, as part of its overall compensation strategy. For stock-based awards granted, the Company records stock-based compensation expense based on the grant date fair value over the requisite service periods for the individual awards, which generally equal the vesting periods. The vesting of stock-based award grants may be based on time, performance conditions, market conditions, or a combination of performance or market conditions. Product Warranties The Company provides warranties on externally sourced and internally developed hardware. The warranty period for all of the Company’s products is generally 90 days to one year, but can extend up to 5 years depending on the manufacturer’s warranty or local law. For internally developed hardware and in cases where the warranty granted to customers for externally sourced hardware is greater than that provided by the manufacturer, the Company records an accrual for the related liability based on historical trends and actual material and labor costs. At the end of each quarter, the Company reevaluates its estimates to assess the adequacy of the recorded warranty liabilities and adjusts the accrued amounts accordingly. Computation of Net Income Per Share Net income per share is presented for both basic earnings per share (“Basic EPS”) and diluted earnings per share (“Diluted EPS”). Basic EPS is based on the weighted-average number of common shares outstanding during the period, excluding non-vested restricted stock held by employees. Diluted EPS is based on the weighted-average number of common and potential common shares outstanding during the period. Potential common shares result from the assumed exercise of outstanding stock options and non-vested restricted stock and restricted stock units, the proceeds and remaining unrecorded compensation expense of which are then assumed to have been used to repurchase outstanding common stock using the treasury stock method. For periods when the Company reports a loss, all potential common stock is considered anti-dilutive. For periods when the Company reports net income, potential common shares with combined purchase prices and unamortized compensation costs in excess of the Company’s average common stock fair value for the related period or that are contingently issuable are considered anti-dilutive. The Company issued convertible senior notes in 2015, and the Company applied the treasury stock method in measuring the dilutive impact of those potential common shares to be issued. Accounting for Restructuring Plans The Company records facility-related and contract termination restructuring charges in accordance with ASC Topic 420, Liabilities: Exit or Disposal Cost Obligations. Based on the Company’s policies for the calculation and payment of severance benefits, the Company accounts for employee-related restructuring charges as an ongoing benefit arrangement in accordance with ASC Topic 712, Compensation - Nonretirement Postemployment Benefits. The Company recognizes facility-related restructuring charges upon exiting all or a portion of a leased facility and meeting cease-use and other requirements. The amount of restructuring charges is based on the fair value of the lease obligation for the abandoned space, which includes a sublease assumption that could be reasonably obtained. Restructuring charges and accruals require significant estimates and assumptions, including sub-lease income assumptions. These estimates and assumptions are monitored on at least a quarterly basis for changes in circumstances and any corresponding adjustments to the accrual are recorded in the Company’s statement of operations in the period when such changes are known. Related Party Transactions From time to time the Company enters into arrangements with parties which may be affiliated with the Company, executive officers and members of the Company’s Board of Directors. These transactions are primarily comprised of sales transactions in the normal course of business and are immaterial to the financial statements for all periods presented. Recent Accounting Pronouncements On May 28, 2014, the Financial Accounting Standards Board (the “FASB”) and the International Accounting Standards Board (the “IASB”) issued substantially converged final standards on revenue recognition. The standard outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. The new revenue recognition guidance becomes effective for the Company on January 1, 2018, and early adoption as of January 1, 2017 is permitted. Entities have the option of using either a full retrospective or a modified approach to adopt the guidance in the Accounting Standards Update (“ASU”). The Company has not yet selected a transition method and is evaluating the effect that the updated standard will have on its consolidated financial statements and related disclosures. In April 2015, the FASB issued ASU No. 2015-03, Simplifying the Presentation of Debt Issuance Costs, which requires debt issuance costs to be presented in the balance sheet as a direct deduction from the carrying value of the associated debt liability. Early adoption is permitted for financial statements that have not been previously issued. The Company incurred transaction costs of $4.7 million relating to the issuance of the convertible senior notes, and has adopted the guidance in 2015. In accounting for the transaction costs, the Company allocated the costs of the offering between debt and equity in proportion to the fair value of the debt and equity recognized. The transaction costs allocated to the debt component of approximately $3.6 million were recorded as a direct deduction from the face amount of the convertible senior notes and are being amortized as interest expense over the term of the notes using the interest method. In August 2014, the FASB issued ASU 2014-15, Presentation of Financial Statements - Going Concern. ASU 2014-15 provides guidance around management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosures. For each reporting period, management will be required to evaluate whether there are conditions or events that raise substantial doubt about a company’s ability to continue as a going concern within one year from the date the financial statements are issued. The new standard is effective for the Company beginning January 1, 2017. Early adoption is permitted. The Company is evaluating the potential impact of adopting this standard on its financial statements. On November 20, 2015, the FASB issued ASU 2015-17, Balance Sheet Classification of Deferred Taxes. The standard requires entities to present all deferred tax assets (“DTAs”) and deferred tax liabilities (“DTLs”) as non-current in a classified balance sheet. The standard simplifies the current guidance, which requires entities to separately present DTAs and DTLs as current and non-current in a classified balance sheet. The new standard is effective for fiscal years and interim periods within those fiscal years, beginning December 15, 2016. Early adoption is permitted. The Company early adopted the guidance retrospectively, resulting in a $0.3 million reclassification of current DTAs to long-term DTAs in the consolidated balance sheet at December 31, 2014. On February 25, 2016, the FASB issued new lease accounting standard, ASU 2016-02, Leases (Topic 842). Lessees will need to recognize virtually all of their leases on the balance sheet, by recording a right-of-use asset and lease liability. The new guidance becomes effective for the Company on January 1, 2019, and early adoption is permitted upon issuance. The Company is evaluating the potential impact of adopting this standard on its financial statements. |
ACQUISITION (Notes) |
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Mergers, Acquisitions and Dispositions Disclosures [Text Block] | ACQUISITION On June 23, 2015, the Company completed the acquisition of Orad Hi-Tech Systems Ltd. (“Orad”), an Israeli company previously listed on the Frankfurt Stock Exchange. Each issued and outstanding share of Orad common stock was canceled and converted into the right to receive consideration equal to €5.67 in cash, representing total consideration paid of $66.0 million based on the exchange rate on the date of closing, net of estimated cash acquired. As a result of the acquisition, the Company incurred merger and integration cost of $5.7 million, which was recorded as general and administrative expenses in the Company’s statement of operations. Orad provides 3D real-time graphics, video servers and related asset management solutions. The acquisition adds applications to Avid’s Studio Suite which the Company intends to connect to the Avid MediaCentral Platform. The following table summarizes the purchase price allocation to the fair value of the assets acquired and liabilities assumed at the date of acquisition (in thousands).
The purchase price allocation resulted in goodwill of $32.6 million, which is not deductible for tax purposes. The goodwill is attributable to expected synergies from combining the operations of Orad with the Company and intangible assets that do not qualify for separate recognition, such as an assembled workforce. The following table presents the identifiable intangible assets acquired and their respective weighted average useful lives (dollars in thousands):
The estimated fair value of intangible assets was determined using the excess earnings method for technology, replacement cost method for customer relationships and relief from royalty method for trade name. Pro Forma Financial Information for Acquisition of Orad (in thousands except per share data, unaudited) The results of operations of Orad have been included in the results of operations of the Company since June 23, 2015, the date of acquisition. The net revenues and net loss for Orad, which are included in the Company’s consolidated statements of operations from the date of acquisition, were $13.1 million and $8.5 million, respectively, for the year ended December 31, 2015. The following unaudited pro forma financial information presents the Company’s results of operations for the years ended December 31, 2015 and 2014 as if the acquisition of Orad had occurred at the beginning of 2014. The pro forma financial information for the combined entities has been prepared for comparative purposes only and is not indicative of what actual results would have been if the acquisition had taken place at the beginning of fiscal 2014, or of future results.
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NET INCOME PER SHARE (Notes) |
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NET INCOME PER SHARE | NET INCOME PER SHARE Net income per common share is presented for both basic income per share (“Basic EPS”) and diluted income per share (“Diluted EPS”). Basic EPS is based on the weighted-average number of common shares outstanding during the period. Diluted EPS is based on the weighted-average number of common shares and common shares equivalents outstanding during the period. The potential common shares that were considered anti-dilutive securities were excluded from the diluted earnings per share calculations for the relevant periods either because the sum of the exercise price per share and the unrecognized compensation cost per share was greater than the average market price of the Company’s common stock for the relevant period, or because they were considered contingently issuable. The contingently issuable potential common shares result from certain stock options and restricted stock units granted to the Company’s employees that vest based on performance conditions, market conditions, or a combination of performance or market conditions. The following table sets forth (in thousands) potential common shares that were considered anti-dilutive securities.
On June 15, 2015, the Company issued $125.0 million aggregate principal amount of its 2.00% Convertible Senior Notes due 2020 (the “Notes”). The Notes are convertible into cash, shares of the Company’s common stock or a combination of cash and shares of common stock, at the Company’s election, based on an initial conversion rate, subject to adjustment. In connection with the offering of the Notes, the Company entered into a capped call transaction with a third party (the “Capped Call”) (see Note R, Long-Term Debt and Credit Agreement). The Company uses the treasury stock method in computing the dilutive impact of the Notes. The Notes are convertible into shares but the Company’s stock price was less than the conversion price at December 31, 2015, and therefore, the Notes are excluded from diluted income per share. The Capped Call is not reflected in diluted net income per share as it will always be anti-dilutive. |
FOREIGN CURRENCY FORWARD CONTRACTS (Notes) |
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Derivative Instruments and Hedging Activities Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
FOREIGN CURRENCY FORWARD CONTRACTS | FOREIGN CURRENCY CONTRACTS As a hedge against the foreign exchange exposure of certain forecasted receivables, payables and cash balances of foreign subsidiaries, the Company enters into short-term foreign currency forward contracts, which typically mature within 30 days of execution. The changes in fair value of the foreign currency forward contracts are intended to offset foreign currency exchange risk on cash flows associated with net monetary assets, and are recorded as gains or losses in the Company’s statement of operations in the period of change. The Company had no outstanding foreign currency forward contracts at December 31, 2015. The Company had foreign currency forward contracts outstanding with an aggregate notional value of $25.4 million at December, 2014 as hedges against such forecasted foreign-currency-denominated receivables, payables and cash balances. The Company may also enter into short-term foreign currency spot and forward contracts as a hedge against the foreign currency exchange risk associated with certain of its net monetary assets denominated in foreign currencies. The Company had no outstanding short-term foreign currency spot contracts at December 31, 2015. The Company had foreign currency contracts outstanding with an aggregate notional value of $2.8 million at December 31, 2014. Because these contracts are not accounted for as hedges, the changes in fair value of these foreign currency contracts are recorded as gains or losses in the Company’s statement of operations. The Company assumed from Orad outstanding foreign currency spot contracts and call and put options to hedge cash flow risks associated with foreign exchange rates. The aggregate notional value of the outstanding contracts and options was $1.0 million at December 31, 2015. The following table sets forth the balance sheet classification and fair values of the Company’s foreign currency contracts (in thousands):
The following table sets forth the net foreign exchange gains (losses) recorded as marketing and selling expenses in the Company’s statements of operations during the years ended December 31, 2015, 2014 and 2013 that resulted from foreign currency forward contracts, foreign currency denominated transactions, and the revaluation of foreign currency denominated assets and liabilities (in thousands):
See Note F for additional information on the fair value measurements for all financial assets and liabilities, including derivative assets and derivative liabilities, that are measured at fair value on a recurring basis. |
FAIR VALUE MEASUREMENTS (Notes) |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
FAIR VALUE MEASUREMENTS | FAIR VALUE MEASUREMENTS Assets and Liabilities Measured at Fair Value on a Recurring Basis On a recurring basis, the Company measures certain financial assets and liabilities at fair value, including foreign-currency contracts and deferred compensation investments. At December 31, 2015 and 2014, all of the Company’s financial assets and liabilities were classified as either Level 1 or Level 2 in the fair value hierarchy. Assets valued using quoted market prices in active markets and classified as Level 1 are certain deferred compensation investments, primarily money market and mutual funds. Assets and liabilities valued based on other observable inputs and classified as Level 2 are foreign currency contracts and certain deferred compensation investments, primarily insurance contracts. The following tables summarize the Company’s fair value hierarchy for its financial assets and liabilities measured at fair value on a recurring basis (in thousands):
(1) Deferred compensation investments at December 31, 2015 included $2.4 million of funds that Orad invested in insurance contracts for the post-employment benefits that Orad employees earned. Financial Instruments Not Recorded at Fair Value The carrying amounts of the Company’s other financial assets and liabilities including cash, accounts receivable, accounts payable and accrued liabilities approximate their respective fair values because of the relatively short period of time between their origination and their expected realization or settlement. At December 31, 2015, the net carrying amount of the Notes is $96.0 million, and the fair value of the Notes is approximately $85.5 million based on open market trading activity, which constitutes a Level 1 input in the fair value hierarchy. |
ACCOUNTS RECEIVABLE (Notes) |
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Receivables [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
ACCOUNTS RECEIVABLE | ACCOUNTS RECEIVABLE Accounts receivable, net of allowances, consisted of the following at December 31, 2015 and 2014 (in thousands):
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INVENTORIES (Notes) |
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Inventory Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
INVENTORIES | INVENTORIES Inventories consisted of the following at December 31, 2015 and 2014 (in thousands):
At December 31, 2015 and 2014, finished goods inventory included $5.3 million and $4.3 million, respectively, associated with products shipped to customers or deferred labor costs for arrangements where revenue recognition had not yet commenced. |
PROPERTY AND EQUIPMENT (Notes) |
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Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
PROPERTY AND EQUIPMENT | PROPERTY AND EQUIPMENT Property and equipment consisted of the following at December 31, 2015 and 2014 (in thousands):
The Company capitalizes certain development costs incurred in connection with its internal use software. For the year ended December 31, 2015, the Company capitalized $5.1 million of contract labor and internal labor costs related to internal use software, and recorded the capitalized costs in Computer and video equipment and software. There were $3.4 million of contract labor and internal labor costs capitalized for the year ended December 31, 2014, and no costs capitalized for the year ended December 31, 2013. Internal use software is amortized on a straight line basis over its estimated useful life of 3 years, and the Company recorded $1.8 million and $0.5 million of amortization expense during 2015 and 2014, respectively. Depreciation and amortization expense related to property and equipment was $13.7 million, $16.1 million and $17.8 million for the years ended December 31, 2015, 2014 and 2013, respectively. |
INTANGIBLE ASSETS AND GOODWILL (Notes) |
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Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
INTANGIBLE ASSETS | INTANGIBLE ASSETS AND GOODWILL Intangible Assets Amortizing identifiable intangible assets related to the Company’s acquisitions or capitalized costs of internally developed or externally purchased software that form the basis for the Company’s products consisted of the following at December 31, 2015 and 2014 (in thousands):
During 2015, the Company wrote off fully amortized technologies and trade names with gross book values of $24.3 million and $4.8 million, respectively. Those technologies and trade names were no longer in use. Amortization expense related to intangible assets in the aggregate was $6.4 million, $1.8 million and $4.9 million for the years ended December 31, 2015, 2014 and 2013, respectively. The Company expects amortization of intangible assets to be approximately $10.3 million in 2016, $9.3 million in 2017, $9.3 million in 2018 and $4.3 million in 2019. Goodwill The acquisition of Orad resulted in goodwill of $32.6 million in 2015. As of October 31, 2015, the Company’s goodwill impairment measurement date, the Company concluded that it was not more likely than not that a goodwill impairment existed. |
OTHER LONG-TERM LIABILITIES (Notes) |
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Other Liabilities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
OTHER LONG-TERM LIABILITIES | OTHER LONG-TERM LIABILITIES Other long-term liabilities consisted of the following at December 31, 2015 and 2014 (in thousands):
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COMMITMENTS AND CONTINGENCIES (Notes) |
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Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
COMMITMENTS AND CONTINGENCIES | COMMITMENTS AND CONTINGENCIES Operating Lease Commitments The Company leases its office space and certain equipment under non-cancelable operating leases. The future minimum lease commitments under these non-cancelable leases at December 31, 2015 were as follows (in thousands):
Included in the operating lease commitments above are obligations under leases for which the Company has vacated the underlying facilities as part of various restructuring plans. These leases expire at various dates through 2021 and represent an aggregate obligation of $7.0 million through 2021. The Company has restructuring accruals of $1.7 million at December 31, 2015, which represents the difference between this aggregate future obligation and future sublease income under actual or estimated potential sublease agreements, on a net present value basis, as well as other facilities-related obligations. The Company received $0.6 million and $0.7 million of sublease income during the years ended December 31, 2015 and 2014, respectively, but none during the year ended December 31, 2013. The Company’s leases for corporate office space in Burlington, Massachusetts, which expire in May 2020, contain renewal options to extend the respective terms of each lease for up to two additional five-year periods. The accompanying consolidated results of operations reflect rent expense on a straight-line basis over the term of the leases. Total expense under operating leases was $14.0 million, $15.0 million and $16.3 million for the years ended December 31, 2015, 2014 and 2013, respectively. Other Commitments The Company has letters of credit that are used as security deposits in connection with the Company’s leased Burlington, Massachusetts office space and other leases. In the event of default on the underlying leases, the landlords would, at December 31, 2015, be eligible to draw against the letters of credit to a maximum of $2.2 million in the aggregate. The letters of credit are subject to aggregate reductions provided the Company is not in default under the underlying leases and meets certain financial performance conditions. In no case will the letters of credit amounts for the Burlington leases be reduced to below $1.2 million in the aggregate throughout the lease periods, all of which extend to May 2020. The Company also has additional letters of credit totaling $0.4 million that support its ongoing operations. These letters of credit have various terms and expire during 2016 and beyond, while some of the letters of credit may automatically renew based on the terms of the underlying agreements. Purchase Commitments and Sole-Source Suppliers At December 31, 2015, the Company had entered into purchase commitments for certain inventory and other goods and services used in its normal operations. The purchase commitments covered by these agreements are generally for a period of less than one year and in the aggregate total $39.5 million. The Company depends on sole-source suppliers for certain key hardware components of its products. Although the Company has procedures in place to mitigate the risks associated with its sole-sourced suppliers, the Company cannot be certain that it will be able to obtain sole-sourced components or finished goods from alternative suppliers or that it will be able to do so on commercially reasonable terms without a material impact on its results of operations or financial position. The Company procures product components and builds inventory based on forecasts of product life cycle and customer demand. If the Company is unable to provide accurate forecasts or manage inventory levels in response to shifts in customer demand, the Company may have insufficient, excess or obsolete product inventory. Contingencies In March 2013 and May 2013, two purported securities class action lawsuits were filed against the Company and certain of the Company’s former executive officers seeking unspecified damages in the U.S. District Court for the District of Massachusetts. In July 2013, the two cases were consolidated and the original plaintiffs agreed to act as co-plaintiffs in the consolidated case. In September 2013, the co-plaintiffs filed a consolidated amended complaint on behalf of those who purchased the Company’s common stock between October 23, 2008 and March 20, 2013. The consolidated amended complaint, which named the Company, certain of the Company’s current and former executive officers and the Company’s former independent accounting firm as defendants, purported to state a claim for violation of federal securities laws as a result of alleged violations of the federal securities laws pursuant to Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 10b-5 promulgated thereunder. In October 2013, the Company filed a motion to dismiss the consolidated amended complaint, resulting in the dismissal of some of the claims, and the dismissal of Mr. Hernandez and one of the two plaintiffs from the case. On December 31, 2014, the parties reached an agreement to settle the case. The agreement called for Avid to cause payment of $2.5 million in respect of the settlement. The settlement was approved and the case was dismissed on May 12, 2015. In April and May 2013, the Company received a document preservation request and inquiry from the SEC Division of Enforcement and a federal grand jury subpoena from the Department of Justice requesting certain documents, including in particular documents related to the Company’s disclosures regarding the Company’s accounting review and revenue transactions. On August 13, 2015, the Company received a letter from the SEC Division of Enforcement stating that the investigation had been completed and that the Division of Enforcement did not intend to recommend any enforcement action against the Company by the SEC. On October 20, 2015, the Company was notified by the Department of Justice that the Department of Justice intends to close its inquiry. The Company’s industry is characterized by the existence of a large number of patents and frequent claims and litigation regarding patent and other intellectual property rights. In addition to the legal proceedings described above, the Company is involved in legal proceedings from time to time arising from the normal course of business activities, including claims of alleged infringement of intellectual property rights and contractual, commercial, employee relations, product or service performance, or other matters. The Company does not believe these matters will have a material adverse effect on the Company’s financial position or results of operations. However, the outcome of legal proceedings and claims brought against the Company is subject to significant uncertainty. Therefore, the Company’s financial position or results of operations may be negatively affected by the unfavorable resolution of one or more of these proceedings for the period in which a matter is resolved. The Company’s results could be materially adversely affected if the Company is accused of, or found to be, infringing third parties’ intellectual property rights. The Company considers all claims on a quarterly basis and based on known facts assesses whether potential losses are considered reasonably possible, probable and estimable. Based upon this assessment, the Company then evaluates disclosure requirements and whether to accrue for such claims in its consolidated financial statements. The Company records a provision for a liability when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. These provisions are reviewed at least quarterly and adjusted to reflect the impacts of negotiations, settlements, rulings, advice of legal counsel and other information and events pertaining to a particular case. At December 31, 2015 and as of the date of filing of these consolidated financial statements, the Company believes that, other than as set forth in this note, no provision for liability nor disclosure is required related to any claims because: (a) there is no reasonable possibility that a loss exceeding amounts already recognized (if any) may be incurred with respect to such claim; (b) a reasonably possible loss or range of loss cannot be estimated; or (c) such estimate is immaterial. Additionally, the Company provides indemnification to certain customers for losses incurred in connection with intellectual property infringement claims brought by third parties with respect to the Company’s products. These indemnification provisions generally offer perpetual coverage for infringement claims based upon the products covered by the agreement and the maximum potential amount of future payments the Company could be required to make under these indemnification provisions is theoretically unlimited. To date, the Company has not incurred material costs related to these indemnification provisions; accordingly, the Company believes the estimated fair value of these indemnification provisions is immaterial. Further, certain of the Company’s arrangements with customers include clauses whereby the Company may be subject to penalties for failure to meet certain performance obligations; however, the Company has not recorded any related material penalties to date. The Company provides warranties on externally sourced and internally developed hardware. For internally developed hardware and in cases where the warranty granted to customers for externally sourced hardware is greater than that provided by the manufacturer, the Company records an accrual for the related liability based on historical trends and actual material and labor costs. The following table sets forth the activity in the product warranty accrual account for the years ended December 31, 2015, 2014 and 2013 (in thousands):
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CAPITAL STOCK (Notes) |
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Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Capital Stock [Text Block] | CAPITAL STOCK Preferred Stock The Company has authorized up to one million shares of preferred stock, $0.01 par value per share, for issuance. Each series of preferred stock shall have such rights, preferences, privileges and restrictions, including voting rights, dividend rights, conversion rights, redemption privileges and liquidation preferences, as may be determined by the Company’s board of directors (the “Board”). Common Stock Repurchases On June 8, 2015, the Company’s Board approved a stock repurchase plan authorizing the Company to repurchase up to $9.0 million of common stock in open market or other transactions from time to time until September 6, 2015. The Company completed the stock repurchase in July 2015. In aggregate, the Company purchased 586,825 shares for a total purchase price of $8.0 million. The repurchased shares are held in treasury. Under some of the Company’s equity compensation plans, employees have the option or may be required to satisfy minimum withholding tax obligations by tendering to the Company a portion of the common stock received under the award. Stock Incentive Plans In November 2014, the Company registered an aggregate of 3,750,000 of its shares of $0.01 par value per share common stock, which have been authorized and reserved for issuance under the Avid Technology, Inc. 2014 Stock Incentive Plan (the “Plan”). The Plan was originally adopted by the Company’s Board of Directors on September 14, 2014 and approved by the Company’s stockholders on October 29, 2014. In connection with the approval of the Plan the Company’s Amended and Restated 2005 Stock Incentive Plan has been closed; no additional awards may be granted under that Plan. Shares available for issuance under the Company’s 2014 Stock Incentive Plan totaled 2,213,283 at December 31, 2015. Under the Plan, the Company may grant stock awards or options to purchase the Company’s common stock to employees, officers, directors and consultants. The exercise price for options generally must be no less than market price on the date of grant. Awards may be performance-based where vesting or exercisability is conditioned on achieving performance objectives, time-based or a combination of both. Current option grants become exercisable over various periods, typically three to four years for employees and one year for non-employee directors, and have a maximum term of seven to ten years. Restricted stock and restricted stock unit awards with time-based vesting typically vest over three to four years for employees and one year for non-employee directors. In November 2014, the Compensation Committee of the Board of Directors modified certain market and performance based options and restricted stock units held by seven employees of the Company that were originally granted between 2009 and 2013. The modifications included (i) a conversion of vesting conditions from market and performance bases to a four year service period, including providing credit for service already rendered prior to the modification and (ii) an acceleration clause that allows vesting of between 50% and 100% of unvested awards if certain 2014 Adjusted EBITDA targets were achieved. In total, options to purchase 933,750 shares and 31,250 restricted stock units were modified, which resulted in incremental compensation expense of $4.3 million, $2.3 million of which was recognized upon modification, $1.5 million of which was recognized in the quarter ended December 31, 2014 upon achieving specific 2014 Adjusted EBITDA targets and the remaining $0.5 million was recognized in 2015. The Company uses the Black-Scholes option pricing model to estimate the fair value of stock option grants with time-based vesting. The Black-Scholes model relies on a number of key assumptions to calculate estimated fair value. The assumed dividend yield of zero is based on the fact that the Company has never paid cash dividends and has no present expectation to pay cash dividends and the Company’s current Financing Agreement precludes the Company from paying dividends. The expected volatility is now based on actual historic stock volatility for periods equivalent to the expected term of the award. The assumed risk-free interest rate is the U.S. Treasury security rate with a term equal to the expected life of the option. The assumed expected life is based on company-specific historical experience considering the exercise behavior of past grants and models the pattern of aggregate exercises. The fair value of restricted stock and restricted stock unit awards with time-based vesting is based on the intrinsic value of the awards at the date of grant, as the awards have a purchase price of $0.01 per share. The Company also issues stock option grants or restricted stock unit awards with vesting based on market conditions, specifically the Company’s stock price and performance conditions, generally using adjusted EBITDA. The fair values and derived service periods for all grants that include vesting based on market conditions are estimated using the Monte Carlo valuation method. For stock option grants that include vesting based on performance conditions, the fair values are estimated using the Black-Scholes option pricing model. For restricted stock unit awards that include vesting based on performance conditions, the fair values are estimated based on the intrinsic values of the awards at the date of grant, as the awards have a purchase price of $0.01 per share. Information with respect to options granted under all stock option plans for the year ended December 31, 2015 was as follows:
The following table sets forth the weighted-average key assumptions and fair value results for stock options granted during the years ended December 31, 2015, 2014 and 2013:
The cash received from the stock options exercised during the year ended December 31, 2015 was $5.0 million. During the years ended December 31, 2014 and 2013, the cash received from and the aggregate intrinsic value of stock options exercised was not significant. Information with respect to non-vested restricted stock units for the year ended December 31, 2015 was as follows:
The weighted-average grant date fair value of restricted stock units granted during the years ended December 31, 2015, 2014 and 2013 was $10.31, $10.19 and $7.84, respectively. The total fair value of restricted stock units vested during the years ended December 31, 2015, 2014, and 2013 was $4.2 million, $2.5 million, and $1.1 million, respectively. Employee Stock Purchase Plan The Company’s Second Amended and Restated 1996 Employee Stock Purchase Plan (the “ESPP”) offers the Company’s shares for purchase at a price equal to 85% of the closing price on the applicable offering period termination date. Shares issued under the ESPP are considered compensatory. Accordingly, the Company is required to measure fair value and record compensation expense for share purchase rights granted under the ESPP. The Company last issued shares under the ESPP on October 31, 2015. In July 2015 the Board of Directors approved an amendment to the plan to change the subscription period from three to six months and accordingly to adjust the payroll cap to $5,000 per plan period. A total of 343,613 shares remained available for issuance under the ESPP at December 31, 2015. The Company uses the Black-Scholes option pricing model to calculate the fair value of shares issued under the ESPP. The Black-Scholes model relies on a number of key assumptions to calculate estimated fair values. The following table sets forth the weighted-average key assumptions and fair value results for shares issued under the ESPP during the years ended December 31, 2015, 2014 and 2013:
The following table sets forth the quantities and average prices of shares issued under the ESPP for the years ended December 31, 2015, 2014 and 2013:
The Company did not realize a material tax benefit from the tax deductions for stock option exercises, vested restricted stock units and shares issued under the ESPP during the years ended December 31, 2015, 2014 or 2013. Stock-Based Compensation Expense The Company uses the accelerated method of attribution for awards with performance conditions and graded vesting features for options granted. The Company estimates forfeiture rates at the time awards are made based on historical and estimated future turnover rates and applies these rates in the calculation of estimated compensation cost. The estimation of forfeiture rates includes a quarterly review of historical turnover rates and an update of the estimated forfeiture rates to be applied to employee classes for the calculation of stock-based compensation. Forfeiture rates for the calculation of stock-based compensation were estimated and applied based on three classes, non-employee directors, executive management staff and other employees. The Company’s annualized estimated forfeiture rates were 0% for non-employee director awards, 10% for executive management staff and 15% for other employee awards. Then-current estimated forfeiture rates are applied quarterly to all outstanding stock options and non-vested restricted stock awards, which may result in a revised estimate of compensation costs related to these stock-based grants. Stock-based compensation was included in the following captions in the Company’s consolidated statements of operations for the years ended December 31, 2015, 2014 and 2013, respectively (in thousands):
At December 31, 2015, there was $9.8 million of total unrecognized compensation cost, before forfeitures, related to non-vested stock-based compensation awards granted under the Company’s stock-based compensation plans. The Company expects this amount to be amortized approximately as follows: $6.0 million in 2016, $3.0 million in 2017 and $0.8 million in 2018. At December 31, 2015, the weighted-average recognition period of the unrecognized compensation cost was approximately one year. |
EMPLOYEE BENEFIT PLANS (Notes) |
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Compensation and Retirement Disclosure [Abstract] | |
EMPLOYEE BENEFIT PLANS | EMPLOYEE BENEFIT PLANS Employee Benefit Plans The Company has a Section 401(k) plan that covers substantially all U.S. employees. The 401(k) plan allows employees to make contributions up to a specified percentage of their compensation. The Company may, upon resolution by the Company’s board of directors, make discretionary contributions to the plan. The Company’s contributions to the plan totaled $2.3 million, $2.2 million and $2.2 million in 2015, 2014 and 2013, respectively. In addition, the Company has various retirement and post-employment plans covering certain international employees. Certain of the plans allow the Company to match employee contributions up to a specified percentage as defined by the plans. The Company’s contributions to these plans totaled $2.2 million, $2.0 million and $1.2 million in 2015, 2014 and 2013, respectively. Deferred Compensation Plans The Company maintains a nonqualified deferred compensation plan (the “Deferred Plan”). The Deferred Plan covers senior management and members of the Board. In November 2013, the Board determined to indefinitely suspend the plan, and not offer participants the opportunity to participate in the Deferred Plan as of 2014. The benefits payable under the Deferred Plan represent an unfunded and unsecured contractual obligation of the Company to pay the value of the deferred compensation in the future, adjusted to reflect deemed investment performance. Payouts are generally made upon termination of employment with the Company. The assets of the deferred plan, as well as the corresponding obligations, were approximately $0.6 million and $1.2 million at December 31, 2015 and 2014, respectively, and were recorded in “other current assets” and “accrued compensation and benefits” at those dates. In connection with the acquisition of a business in 2010, the Company assumed the assets and liabilities of a deferred compensation arrangement for a single individual in Germany. The arrangement represents a contractual obligation of the Company to pay a fixed euro amount for a period specified in the contract. In connection with the acquisition of Orad, the Company assumed the assets and liabilities of a deferred compensation arrangement for employees in Israel. At December 31, 2015 and 2014, the Company’s assets and liabilities related to the arrangements consisted of assets recorded in “other long-term assets” of $3.0 million at December 31, 2015 and $0.6 million at December 31, 2014, representing the value of related insurance contracts and investments, and liabilities recorded as “long-term liabilities” of $7.3 million at December 31, 2015 and $4.7 million at December 31, 2014, respectively, representing the fair value of the estimated benefits to be paid under the |
INCOME TAXES (Notes) |
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Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
INCOME TAXES | INCOME TAXES Income from before income taxes and the components of the income tax provision consisted of the following for the years ended December 31, 2015, 2014 and 2013 (in thousands):
Net deferred tax assets (liabilities) consisted of the following at December 31, 2015 and 2014 (in thousands):
On January 1, 2015 the Company adopted ASU 2015-17, Balance Sheet Classification of Deferred Taxes. The standard requires entities to present DTAs and DTLs as non-current in the classified balance sheet. The standard simplifies the current guidance, which requires entities to separately present DTAs and DTLs as current and non-current in a classified balance sheet. The Company early adopted the guidance to simplify its reporting for the current year. The consolidated balance sheet at December 31, 2014 was retrospectively adjusted, resulting in a $0.3 million reclassification of current DTAs to long-term DTAs. Deferred tax assets and liabilities reflect the net tax effects of the tax credits and net operating loss carryforwards and the temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The ultimate realization of the net deferred tax assets is dependent upon the generation of sufficient future taxable income in the applicable tax jurisdictions. Based on the magnitude of the deferred tax assets at December 31, 2015 and 2014 and the level of historical U.S. tax losses, management has determined that the uncertainty regarding the realization of these assets warranted a significant valuation allowance at December 31, 2015 and 2014. For U.S. federal and state income tax purposes at December 31, 2015, the Company had tax credit carryforwards of $53.1 million, which will expire between 2016 and 2035, and net operating loss carryforwards of $745.6 million, which will expire between 2019 and 2035. The federal net operating loss and tax credit amounts are subject to annual limitations under Section 382 change of ownership rules of the Internal Revenue Code. The Company completed an assessment at March 31, 2015 regarding whether there may have been a Section 382 ownership change and concluded that it is more likely than not that none of the Company’s net operating loss and tax credit amounts are subject to any Section 382 limitation. Additionally, the Company has foreign net operating loss carryforwards of $33.8 million and tax credit carryforwards of $3.7 million that begin to expire in 2029. The Company has determined there is uncertainty regarding the realization of a portion of these assets and has recorded a valuation allowance against $23.1 million of net operating losses and $3.7 million of tax credits at December 31, 2015. The Company’s assessment of the valuation allowance on the U.S. and foreign deferred tax assets could change in the future based on its levels of pre-tax income and other tax related adjustments. Removal of the valuation allowance in whole or in part would result in a non-cash reduction in income tax expense during the period of removal. Excluded from the above deferred tax schedule at December 31, 2015 are tax assets totaling $33.7 million resulting from the exercise of employee stock options, because recognition of these assets will occur upon utilization of these deferred tax assets to reduce taxes payable and will result in a credit to additional paid-in capital within stockholders’ equity rather than the provision for income taxes. The following table sets forth a reconciliation of the Company’s income tax provision (benefit) to the statutory U.S. federal tax amount for the years ended December 31, 2015, 2014 and 2013:
The cumulative amount of undistributed earnings of foreign subsidiaries, which is intended to be indefinitely reinvested and for which U.S. income taxes have not been provided, totaled $38.5 million at December 31, 2015. The Company does not have any plans to repatriate these earnings because the underlying cash will be used to fund the ongoing operations of the foreign subsidiaries. The additional taxes that might be payable upon repatriation of foreign earnings are not significant. 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 unrecognized tax positions. The Company is disclosing unrecognized tax benefits primarily related to the foreign tax implications arising from the changes in revenue recognition that arose in periods prior to 2012. The unrecognized tax benefits did not have an impact on the effective tax rate because the Company maintains a full valuation allowance on the related loss carryforwards. At December 31, 2013, the Company’s unrecognized tax benefits and related accrued interest and penalties totaled $24.7 million, of which $0.8 million would affect the Company’s income tax provision and effective tax rate if recognized. At December 31, 2014, the Company’s unrecognized tax benefits and related accrued interest and penalties totaled $25.8 million, of which $0.8 million would affect the Company’s effective tax rate if recognized. At December 31, 2015, the Company’s unrecognized tax benefits and related accrued interest and penalties totaled $26.0 million, of which $3.2 million would affect the Company’s income tax provision and effective tax rate if recognized. The following table sets forth a reconciliation of the beginning and ending amounts of unrecognized tax benefits, excluding the impact of interest and penalties, for the years ended December 31, 2015, 2014 and 2013 (in thousands):
The Company recognizes interest and penalties related to uncertain tax positions in income tax expense. Accrued interest and penalties related to uncertain tax positions at December 31, 2015 and 2014 were not material. The tax years 2008 through 2015 remain open to examination by taxing authorities in the jurisdictions in which the Company operates. The most significant operating jurisdictions include: the United States, Ireland, the Netherlands, Germany, Israel, Japan, and the United Kingdom. |
RESTRUCTURING COSTS AND ACCRUALS (Notes) |
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Restructuring and Related Activities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
RESTRUCTURING COSTS AND ACCRUALS | RESTRUCTURING COSTS AND ACCRUALS 2016 Restructuring Plan In the first quarter of 2016, the Company commenced restructuring actions that are part of a broad restructuring plan encompassing a series of measures intended to allow the Company to more efficiently operate in a leaner, and more directed cost structure. These include reductions in the Company’s workforce, facilities consolidation, transferring certain business processes to lower cost regions, and reducing other third-party services costs. In connection with this restructuring plan, the Company expects to incur incremental cash expenditures of approximately $25 million relating to termination benefits, facility costs, employee overlap expenses and related actions. The Company expects approximately $14 million of the expenditures will be recorded as restructuring expenses in the quarters ending December 31, 2015 through June 30, 2017. The Company anticipates that the restructuring plan will be substantially complete by the end of the second quarter of 2017 and will result in annualized costs savings of appropriately $68 million. The restructuring charges of $5.8 million recorded during the quarter ended December 31, 2015, represented an initial elimination of 111 positions worldwide during January and February of 2016. 2013 Restructuring Actions In June 2013, the Company’s leadership evaluated the marketing and selling teams and, in an effort to better align sales resources with the Company’s strategic goals and enhance its global account team approach, eliminated 31 positions. As a result, the Company recognized related restructuring costs of $1.7 million in 2013. During November and December 2013, the Company’s executive management team identified opportunities to lower costs in the supply and hardware technology group by eliminating 29 positions in hardware shared services and 15 positions in the supply and technology group. Additionally, an engineering reorganization at the same time resulted in the elimination of four engineering positions. As a result, the Company recognized $1.7 million of related restructuring costs in 2013. All of the restructuring costs related to 2013 restructuring actions were fully paid as of December 31, 2015, no further actions are anticipated. 2012 Restructuring Plan In June 2012, the Company committed to a series of strategic actions (the “2012 Plan”) to focus on its Broadcast and Media market and Video and Audio Post and Professional market and to drive improved operating performance. These actions included the divestiture of certain of the Company’s consumer-focused product lines, a rationalization of the business operations and a reduction in force. Actions under the plan included the elimination of approximately 280 positions in June 2012, the abandonment of one of the Company’s facilities in Burlington, Massachusetts and the partial abandonment of facilities in Mountain View and Daly City, California, in September 2012, and the partial abandonment of the facility in Pinewood, UK, in December 2012. During 2012, the Company recorded restructuring charges of $13.9 million related to severance costs and $8.6 million for the closure or partial closure of facilities, which included non-cash amounts of $1.4 million for fixed asset write-offs and $1.0 million for deferred rent liability write-offs during 2012. During 2013, the Company recorded $0.1 million in additional severance costs and revisions totaling $1.8 million resulting from sublease assumption changes and other costs related to the abandoned facilities under the 2012 Plan. The Company substantially completed all actions under the 2012 Plan prior to December 31, 2012. In June 2014, the Company signed an agreement for surrender of the partially abandoned property at Pinewood, UK. As a result, the Company recorded a recovery of $0.2 million, as the Company was released from all obligations related to the surrendered property. In June 2015, the Company recorded a revision of restructuring costs of $0.5 million resulting from an update to the sublease assumption related to the Company’s Mountain View, California facility that was partially abandoned in 2012. No further actions are anticipated under the 2012 restructuring plans. Prior Years’ Restructuring Plans The remaining accrual balance of $0.3 million at December 31, 2015 was related to the closure of part of the Company’s Dublin, Ireland facility under the 2008 Plan. No further actions are anticipated under the prior years’ restructuring plans. Restructuring Summary The following table sets forth the activity in the restructuring accruals for the years ended December 31, 2015, 2014 and 2013 (in thousands):
The employee-related accruals at December 31, 2015 and 2014 represent severance costs to former employees that will be paid out within twelve months, and are, therefore, included in the caption “accrued expenses and other current liabilities” in the Company’s consolidated balance sheets. The facilities-related and other accruals at December 31, 2015 and 2014 represent contractual lease payments, net of estimated sublease income, on space vacated as part of the Company’s restructuring actions. The leases, and payments against the amounts accrued, extend through 2021 unless the Company is able to negotiate earlier terminations. Of the total facilities-related accruals, $1.0 million was included in the caption “accrued expenses and other current liabilities” and $0.6 million was included in the caption “other long-term liabilities” in the Company’s consolidated balance sheet at December 31, 2015. At December 31, 2014, $1.0 million was included in the caption “accrued expenses and other current liabilities” and $1.3 million was included in the caption “other long-term liabilities.” |
PRODUCT AND GEOGRAPHIC INFORMATION (Notes) |
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
PRODUCT AND GEOGRAPHIC INFORMATION | PRODUCT AND GEOGRAPHIC INFORMATION The Company provides digital media content-creation, management and distribution products and solutions for film, video, audio and broadcast professionals, as well as artists and musicians, which the Company classifies as two types, video and audio. The Company also classifies all its maintenance, professional services and training revenues as services revenues. Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. The Company’s evaluation of the discrete financial information that is regularly reviewed by the chief operating decision makers determined that in 2015, 2014 and 2013 the Company had only one operating segment. Specifically, the Company does not internally measure profitability based upon video, audio, or service revenue. The Company’s video products and solutions are designed to improve the productivity of video and film editors and broadcasters by enabling them to edit video, film and sound; manage media assets; and automate workflows. Professional video creative software and hardware products include the Media Composer product line used to edit film, television programmings, news broadcasts, commercials and other video content. Video products also include Avid ISIS shared storage systems and Avid Interplay asset management solutions that provide complete network, storage and database solutions to enable users to simultaneously share and manage media assets throughout a project or organization. The Company’s audio products and solutions include digital audio software and workstation solutions, control surfaces, live sound systems and notation software that provide music creation; audio recording, editing, and mixing; and live performance solutions. Audio products include Pro Tools digital audio software and workstation solutions to facilitate the audio production process, including music and sound creation, recording, editing, signal processing, integrated surround mixing and mastering, and reference video playback. Audio products also include a range of complementary control surfaces and consoles, including the System 5 and System 6 modular consoles, as well as the VENUE live-sound systems and Sibelius-branded notation software. The Company’s services revenues are primarily derived from the sale of maintenance contracts and professional service and the recognition of revenues for Implied Maintenance Release PCS. The Company provides online and telephone support and access to software upgrades for customers whose products are under warranty or covered by a maintenance contract. The Company’s professional services team provides installation, integration, planning, consulting and training services. The following is a summary of the Company’s revenues by type for the years ended December 31, 2015, 2014 and 2013 (in thousands):
The following table sets forth the Company’s revenues from by geographic region for the years ended December 31, 2015, 2014 and 2013 (in thousands):
The following table presents the Company’s long-lived assets, excluding intangible assets, by geography at December 31, 2015 and 2014 (in thousands):
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LONG TERM DEBT AND CREDIT AGREEMENT (Notes) |
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||
CREDIT AGREEMENT | LONG TERM DEBT AND CREDIT AGREEMENT 2.00% Convertible Senior Notes due 2020 On June 15, 2015, the Company issued $125.0 million aggregate principal amount of its 2.00% Convertible Senior Notes due 2020 (the “Notes”) in an offering conducted in accordance with Rule 144A under the Securities Act of 1933. The net proceeds from the offering were $120.3 million after deducting the offering expenses. The Notes pay interest semi-annually on June 15 and December 15 of each year, beginning on December 15, 2015, at an annual rate of 2.00% and mature on June 15, 2020 unless earlier converted or repurchased in accordance with their terms prior to such date. Additional interest may be payable upon the occurrence of certain event of default relating to the Company’s failure to deliver certain documents or reports to the Trustee, the Company’s failure to timely file any document or report required pursuant to Section 13 or 15(d) of the Exchange Act or if the Notes are not freely tradable as of one year after the last date of original issuance of the Notes. The Notes are convertible into cash, shares of the Company’s common stock or a combination of cash and shares of common stock, at the Company’s election, based on an initial conversion rate, subject to adjustment, of 45.5840 shares per $1,000 principal amount of Notes, which is equal to an initial conversion price of $21.94 per share. Prior to December 15, 2019, the Notes are convertible only in the following circumstances: (1) during any calendar quarter commencing after September 30, 2015, if the last reported sale price of the Company’s common stock is greater than or equal to 130% of the applicable conversion price for at least 20 trading days during a period of 30 consecutive trading days ending on the last trading day of the preceding calendar quarter; (2) during the five business day period after any five consecutive trading day period (the “Measurement Period”) in which the trading price per $1,000 principal amount of Notes for each trading day in the Measurement Period was less than 98% of the product of the last reported sale price of the Company’s common stock and the conversion rate on such trading day; or (3) upon the occurrence of specified corporate transactions. On or after December 15, 2019 until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert their Notes at any time, regardless of the foregoing circumstances. The Company may not redeem the Notes prior to their maturity, which means that the Company is not required to redeem or retire the Notes periodically. The Notes are senior unsecured obligations. Upon the occurrence of certain specified fundamental changes, the holders may require the Company to repurchase all or a portion of the Notes for cash at 100% of the principal amount of the Notes being purchased, plus any accrued and unpaid interest. In accounting for the Notes at issuance, the Company allocated proceeds from the Notes into debt and equity components according to the accounting standards for convertible debt instruments that may be fully or partially settled in cash upon conversion. The initial carrying amount of the debt component, which approximates its fair value, was estimated by using an interest rate for nonconvertible debt, with terms similar to the Notes. The excess of the principal amount of the Notes over the fair value of the debt component was recorded as a debt discount and a corresponding increase in additional paid-in capital. The debt discount is accreted to the carrying value of the Notes over their term as interest expense using the interest method. Upon issuance of the Notes, the Company recorded $96.7 million as debt and $28.3 million as additional paid-in capital in stockholders’ equity. The effective interest rate used to estimate the fair value of the debt was 7.66%. The Company recorded $2.9 million debt discount accretion as interest expenses in the Company’s statement of operations for the year ended December 31, 2015. Total interest expense for the year ended December 31, 2015 was $4.3 million, reflecting the coupon and accretion of the discount. In connection with the issuance of the Notes, the Company recorded an income tax benefit of $6.5 million as a discrete item for the year ended December 31, 2015 as a result of the creation of a deferred tax liability associated with the portion of the Notes that was classified within stockholders’ equity. While GAAP requires the offset of the deferred tax liability to be recorded in additional paid-in capital, consistent with the equity portion of the Notes, the creation of the deferred tax liability produced evidence of recoverability of deferred tax assets, which resulted in the release of a valuation allowance, totaling $6.5 million, reflected as an income tax benefit in the current period. The Company incurred transaction costs of $4.7 million relating to the issuance of the Notes. The Company adopted ASU No. 2015-03, Simplifying the Presentation of Debt Issuance Costs, which requires that debt issuance costs be classified as a reduction in the carrying value of the debt. In accounting for these costs, the Company allocated the costs of the offering between debt and equity in proportion to the fair value of the debt and equity recognized. The transaction costs allocated to the debt component of approximately $3.6 million were recorded as a direct deduction from the face amount of the Notes and are being amortized as interest expense over the term of the Notes using the interest method. The transaction costs allocated to the equity component of approximately $1.1 million were recorded as a decrease in additional paid-in capital. The net carrying amount of the liability component of the Notes consisted of the following at December 31, 2015 (in thousands):
Capped Call Transaction In connection with the offering of the Notes, on June 9, 2015, the Company entered into a capped call derivative transaction with a third party (the “Capped Call”). The Capped Call is expected generally to reduce the potential dilution to the common stock and/or offset any cash payments the Company may be required to make in excess of the principal amount upon conversion of the Notes in the event that the market price per share of the common stock is greater than the strike price of the Capped Call. The Capped Call has a strike price of $21.94 and a cap price of $26.00 and is exercisable by the Company when and if the Notes are converted. If, upon conversion of the Notes, the price of the Company’s common stock is above the strike price of the Capped Call, the counterparty will deliver shares of common stock and/or cash with an aggregate value approximately equal to the difference between the price of the common stock at the conversion date (as defined, with a maximum price for purposes of this calculation equal to the cap price) and the strike price, multiplied by the number of shares of common stock related to the portion of the Capped Call being exercised. The Capped Call expires on June 15, 2020. The Company paid $10.1 million for the Capped Call and recorded the payment as a decrease to additional paid-in capital. Credit Facilities On February 26, 2016, the Company entered into a Financing Agreement (the “Financing Agreement”) with Cerberus Business Finance, LLC, as collateral and administrative agent, and the lenders party thereto (the “Lenders”). Pursuant to the Financing Agreement, the Lenders agreed to provide the Company with (a) a term loan in the aggregate principal amount of $100 million (the “Term Loan”) and (b) a revolving credit facility (the “Credit Facility”) of up to a maximum of $5 million in borrowings outstanding at any time. All outstanding loans under the Financing Agreement will become due and payable, on the earlier of February 26, 2021 and the date that is 30 days prior to June 15, 2020, the scheduled maturity date of the Notes. The Company borrowed the full amount of the Term Loan, or $100 million, as of the Closing Date, but did not borrow any amount under the Credit Facility as of the Closing Date. Concurrently with the entry into the Financing Agreement, on February 26, 2016 the Company terminated its existing Credit Agreement, dated June 22, 2015, among the Company and certain of its subsidiaries, as borrowers, KeyBank National Association, as Administrative Agent and the other lender parties thereto, and repaid all outstanding borrowings under such agreement. There were no penalties paid by the Company in connection with this termination. Interest accrues on outstanding borrowings under the Credit Facility and the Term Loan at a rate of either the LIBOR Rate (as defined in the Financing Agreement) plus 6.75% or a Reference Rate (as defined in the Financing Agreement) plus 5.75%, at the option of the Company. The Company must also pay to the Lenders, on a monthly basis, an unused line fee at a rate of 0.5% per annum. The Company may prepay all or any portion of the Term Loan prior to its stated maturity, subject to the payment of certain fees based on the amount repaid. The Term Loan requires quarterly principal payments of $1.25 million commencing in June 2016. The Term Loan also requires the Company to use excess cash, as defined in the Financing Agreement, to repay outstanding principal. The Company granted a security interest on substantially all of their assets to secure the obligations under the Credit Facility and the Term Loan. The Financing Agreement contains customary representations and warranties, covenants, mandatory prepayments, and events of default under which the Company’s payment obligations may be accelerated. The Financing Agreement includes covenants requiring the Company to maintain a Leverage Ratio (defined as the ratio of (a) consolidated total funded indebtedness to (b) consolidated Adjusted EBITDA) of no greater than 4.35:1.00 for the four quarters ending June 30, 2016, 5.40:1.00 for the four quarters ending September 30, 2016, 4.20:1.00 for the four quarters ending December 31, 2016 and thereafter declining over time from 3.50:1.00 to 2.50:1.00. The Financing Agreement also restricts the Company from making capital expenditures in excess of $20,000,000 in any fiscal year. The Financing Agreement contains restrictive covenants that are customary for an agreement of this kind, including, for example, covenants that restrict the Company from incurring additional indebtedness, granting liens, making investments and restricted payments, making acquisitions, paying dividends and engaging in transactions with affiliates. |
QUARTERLY RESULTS (UNAUDITED) (Notes) |
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Quarterly Financial Information Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
QUARTERLY RESULTS (UNAUDITED) | QUARTERLY RESULTS (UNAUDITED) The following information has been derived from unaudited consolidated financial statements that, in the opinion of management, include all normal recurring adjustments necessary for a fair presentation of such information.
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BUSINESS Business (Policies) |
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Subsequent Events, Policy [Policy Text Block] | In the first quarter of 2016, the Company commenced restructuring actions that are part of a broad restructuring plan encompassing a series of measures intended to allow the Company to more efficiently operate in a leaner, and more directed cost structure. These include reductions in the Company’s workforce, facilities consolidation, transferring certain business processes to lower cost regions, and reducing other third-party services costs. In connection with this restructuring plan, the Company expects to incur incremental cash expenditures of approximately $25 million relating to termination benefits, facility costs, employee overlap expenses and related actions. The Company anticipates that the restructuring plan will be substantially complete by the end of the second quarter of 2017 and when fully implemented, is expected to result in annualized costs savings of appropriately $68 million. In connection with the cost efficiency program, on February 26, 2016, the Company entered into a term loan with an aggregate principal amount of $100 million and up to a maximum of $5 million in revolving credit (collectively, the “Financing Agreement”). All outstanding loans under the Financing Agreement will become due and payable in February 2021, or in May 2020 if the $125.0 million in outstanding principal from the 2.00% convertible senior notes due June 15, 2020 have not been repaid or refinanced. The Financing Agreement requires the Company to comply with a financial statement covenant that stipulates a maximum leverage ratio commencing in June 30, 2016. Proceeds from the Financing Agreement will be used to replace the existing $35 million revolving credit facility, finance the Company’s efficiency program and other initiatives, and provide operating flexibility throughout the remainder of the transformation in this period of heightened market volatility. The Company estimates that after paying for both debt issuance costs and the efficiency program, the new financing will provide approximately $70 million of available liquidity, about half of which replaces the existing revolving credit facility with the remainder providing incremental liquidity to fund operations. Concurrent with entering into the Financing Agreement, the Company terminated its existing revolving credit agreement, and repaid all outstanding borrowings under the revolving credit agreement. There were no penalties paid by the Company in connection with the termination of the revolving credit agreement. |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Summary of Significant Accounting Policies (Policies) |
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Consolidation, Policy [Policy Text Block] | Principles of Consolidation The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. Intercompany balances and transactions have been eliminated. Basis of Presentation The Company’s preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reported periods. Actual results could differ from the Company’s estimates. |
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Revenue Recognition, Policy [Policy Text Block] | Revenue Recognition General The Company commences revenue recognition when persuasive evidence of an arrangement exists, delivery has occurred, the sales price is fixed or determinable and collection is reasonably assured. Generally, the products the Company sells do not require significant production, modification or customization. Installation of the Company’s products is generally routine, consists of implementation and configuration and does not have to be performed by the Company. At the time of a sales transaction, the Company makes an assessment of the collectability of the amount due from the customer. Revenues are recognized only if it is reasonably assured that collection will occur. When making this assessment, the Company considers customer credit-worthiness and historical payment experience. If it is determined from the outset of the arrangement that collection is not reasonably assured, revenues are recognized on a cash basis, provided that all other revenue recognition criteria are satisfied. At the outset of the arrangement, the Company also assesses whether the fee associated with the order is fixed or determinable and free of contingencies or significant uncertainties. When assessing whether the fee is fixed or determinable, the Company considers the payment terms of the transaction, the Company’s collection experience in similar transactions without making concessions, and the Company’s involvement, if any, in third-party financing transactions, among other factors. If the fee is not fixed or determinable, revenues are recognized only as payments become due from the customer, provided that all other revenue recognition criteria are met. If a significant portion of the fee is due after the Company’s normal payment terms, the Company evaluates whether the Company has sufficient history of successfully collecting past transactions with similar terms without offering concessions. If that collection history is sufficient, revenue recognition commences, upon delivery of the products, assuming all other revenue recognition criteria are satisfied. If the Company was to make different judgments or assumptions about any of these matters, it could cause a material increase or decrease in the amount of revenues reported in a particular period. The Company often receives multiple purchase orders or contracts from a single customer or a group of related customers that are evaluated to determine if they are, in effect, part of a single arrangement. In situations when the Company has concluded that two or more orders with the same customer are so closely related that they are, in effect, parts of a single arrangement, the Company accounts for those orders as a single arrangement for revenue recognition purposes. In other circumstances, when the Company has concluded that two or more orders with the same customer are independent buying decisions, such as an earlier purchase of a product and a subsequent purchase of a software upgrade or maintenance contract, the Company accounts for those orders as separate arrangements for revenue recognition purposes. For many of the Company’s products, there has been an ongoing practice of Avid making available at no charge to customers minor feature and compatibility enhancements as well as bug fixes on a when-and-if-available basis (collectively “Software Updates”), for a period of time after initial sales to end users. The implicit obligation to make such Software Updates available to customers over a period of time represents implied post-contract customer support, which is deemed to be a deliverable in each arrangement and is accounted for as a separate element (“Implied Maintenance Release PCS”). Over the course of the last two years, in connection with a strategic initiative to increase support and other recurring revenue streams, the Company has taken a number of steps to eliminate the longstanding practice of providing Implied Maintenance Release PCS for the Media Composer, Pro Tools and Sibelius product lines. On Media Composer 8.0 in particular, which was released in May 2014, management has (i) clearly communicated a policy of no longer providing any Software Updates or other support to customers that are not covered under a paid support plan and (ii) implemented robust digital rights management tools to enforce the policy. With the new policy and technology for Media Composer 8.0 in place, combined with management’s intent to continue to adhere to the policy, management concluded in the third quarter of 2015 that Implied Maintenance Release PCS for Media Composer 8.0 transactions no longer exists. As a result of the conclusion that Implied Maintenance Release PCS on Media Composer 8.0 has ended, revenue and net income for the twelve months ended December 31, 2015 increased by $13.0 million, reflecting the recognition of orders received after the launch of Media Composer 8.0 that would have qualified for earlier recognition using the residual method of accounting. In addition, as the elimination of Implied Maintenance Release PCS also resulted in the accelerated recognition of maintenance and product revenues that were previously being recognized over the expected period of Implied Maintenance Release PCS rather than the contractual maintenance period, the change in the estimated amortization period of transactions being recognized on a ratable basis resulted in an additional $9.5 million of revenue during the twelve months ended December 31, 2015. Management also concluded in the fourth quarter of 2015 that Implied Maintenance Release PCS on Sibelius 8.0 had ended, which did not have a significant impact on revenue recognition for the twelve months ended December 31, 2015. Management will continue to evaluate the judgment of whether Implied Maintenance Release PCS exists on each product line and version. If and when management concludes Implied Maintenance Release PCS no longer exists for other product lines or versions in future quarters, software revenue related to orders affected will be accelerated and prospective revenue recognition on new product orders will be recognized upfront, assuming all other revenue recognition criteria are met and vendor specific objective evidence (“VSOE”) of fair value exists for all undelivered elements. The Company enters into certain contractual arrangements that have multiple elements, one or more of which may be delivered subsequent to the delivery of other elements. These multiple-deliverable arrangements may include products, support, training, professional services and Implied Maintenance Release PCS. For these multiple-element arrangements, the Company allocates revenue to each deliverable of the arrangement based on the relative selling prices of the deliverables. In such circumstances, the Company first determines the selling price of each deliverable based on (i) VSOE of fair value if that exists; (ii) third-party evidence of selling price (“TPE”), when VSOE does not exist; or (iii) best estimate of the selling price (“BESP”), when neither VSOE nor TPE exists. Revenue is then allocated to the non-software deliverables as a group and to the software deliverables as a group using the relative selling prices of each of the deliverables in the arrangement based on the selling price hierarchy. The Company’s process for determining BESP for deliverables for which VSOE or TPE does not exist involves significant management judgment. In determining BESP, the Company considers a number of data points, including:
In determining a BESP for Implied Maintenance Release PCS, which the Company does not sell separately, the Company considers (i) the service period for the Implied Maintenance Release PCS, (ii) the differential in value of the Implied Maintenance Release PCS deliverable compared to a full support contract, (iii) the likely list price that would have resulted from the Company’s established pricing practices had the deliverable been offered separately, and (iv) the prices a customer would likely be willing to pay. The Company estimates the service period of Implied Maintenance Release PCS based on the length of time the product version purchased by the customer is planned to be supported with Software Updates. If facts and circumstances indicate that the original service period of Implied Maintenance Release PCS for a product has changed significantly after original revenue recognition has commenced, the Company will modify the remaining estimated service period accordingly and recognize the then-remaining deferred revenue balance over the revised service period. The Company has established VSOE of fair value for all professional services and training and for some of the Company’s support offerings. The Company’s policy for establishing VSOE of fair value consists of evaluating standalone sales, where available, to determine if a substantial portion of the transactions fall within a reasonable range. If a sufficient volume of standalone sales exist and the standalone pricing for a substantial portion of the transactions falls within a reasonable range, management concludes that VSOE of fair value exists. In accordance with ASU No. 2009-14, the Company excludes from the scope of software revenue recognition requirements the Company’s sales of tangible products that contain both software and non-software components that function together to deliver the essential functionality of the tangible products. The Company adopted ASU No. 2009-13 and ASU No. 2009-14 prospectively on January 1, 2011 for new and materially modified arrangements originating after December 31, 2010. Prior to the Company’s adoption of ASU No. 2009-14, the Company primarily recognized revenues using the revenue recognition criteria of Accounting Standards Codification, or ASC, Subtopic 985-605, Software-Revenue Recognition. As a result of the Company’s adoption of ASU No. 2009-14 on January 1, 2011, a majority of the Company’s products are now considered non-software elements under GAAP, which excludes them from the scope of ASC Subtopic 985-605 and includes them within the scope of ASC Topic 605, Revenue Recognition. Because the Company had not been able to establish VSOE of fair value for Implied Maintenance Release PCS, as described further below, substantially all revenue arrangements prior to January 1, 2011 were recognized on a ratable basis over the service period of Implied Maintenance Release PCS. Subsequent to January 1, 2011 and the adoption of ASU No. 2009-14, the Company determines a relative selling price for all elements of the arrangement through the use of BESP, as VSOE and TPE are typically not available, resulting in revenue recognition upon delivery of arrangement consideration attributable to product revenue, provided all other criteria for revenue recognition are met, and revenue recognition of Implied Maintenance Release PCS and other service and support elements over time as services are rendered. Revenue Recognition of Non-Software Deliverables Revenue from products that are considered non-software deliverables is recognized upon delivery of the product to the customer. Products are considered delivered to the customer once they have been shipped and title and risk of loss has been transferred. For most of the Company’s product sales, these criteria are met at the time the product is shipped. Revenue from support that is considered a non-software deliverable is initially deferred and is recognized ratably over the contractual period of the arrangement, which is generally 12 months. Professional services and training services are typically sold to customers on a time and materials basis. Revenue from professional services and training services that are considered non-software deliverables is recognized for these deliverables as services are provided to the customer. Revenue for Implied Maintenance Release PCS that is considered a non-software deliverable is recognized ratably over the service period of Implied Maintenance Release PCS, which ranges from 1 to 8 years. Revenue Recognition of Software Deliverables The Company recognizes the following types of elements sold using software revenue recognition guidance: (i) software products and software upgrades, when the software sold in a customer arrangement is more than incidental to the arrangement as a whole and the product does not contain hardware that functions with the software to provide essential functionality, (ii) initial support contracts where the underlying product being supported is considered to be a software deliverable, (iii) support contract renewals, and (iv) professional services and training that relate to deliverables considered to be software deliverables. Because the Company does not have VSOE of the fair value of its software products, the Company is permitted to account for its typical customer arrangements that include multiple elements using the residual method. Under the residual method, the VSOE of fair value of the undelivered elements (which could include support, professional services or training, or any combination thereof) is deferred and the remaining portion of the total arrangement fee is recognized as revenue for the delivered elements. If evidence of the VSOE of fair value of one or more undelivered elements does not exist, revenues are deferred and recognized when delivery of those elements occurs or when VSOE of fair value can be established. VSOE of fair value is typically based on the price charged when the element is sold separately to customers. The Company is unable to use the residual method to recognize revenues for many arrangements that include products that are software deliverables under GAAP since VSOE of fair value does not exist for Implied Maintenance Release PCS elements, which are included in many of the Company’s arrangements. For software products that include Implied Maintenance Release PCS, an element for which VSOE of fair value does not exist, revenue for the entire arrangement fee, which could include combinations of product, professional services, training and support, is recognized ratably as a group over the longest service period of any deliverable in the arrangement, with recognition commencing on the date delivery has occurred for all deliverables in the arrangement (or begins to occur in the case of professional services, training and support). Standalone sales of support contracts are recognized ratably over the service period of the product being supported. From time to time, the Company offers certain customers free upgrades or specified future products or enhancements. When a software deliverable arrangement contains an Implied Maintenance Release PCS deliverable, revenue recognition of the entire arrangement will only commence when any free upgrades or specified future products or enhancements have been delivered, assuming all other products in the arrangement have been delivered and all services, if any, have commenced. Other Revenue Recognition Policies In a limited number of arrangements, the professional services and training to be delivered are considered essential to the functionality of the Company’s software products. If services sold in an arrangement are deemed to be essential to the functionality of the software products, the arrangement is accounted for using contract accounting. As the Company has concluded that it cannot reliably estimate its contract costs, the Company uses the completed contract method of contract accounting. The completed contract method of accounting defers all revenue and costs until the date that the products have been delivered and professional services, exclusive of post-contract customer support, have been completed. Deferred costs related to fully deferred contracts are recorded as a component of inventories in the consolidated balance sheet, and generally all other costs of sales are recognized when revenue recognition commences. The Company records as revenues all amounts billed to customers for shipping and handling costs and records its actual shipping costs as a component of cost of revenues. Reimbursements received from customers for out-of-pocket expenses are recorded as revenues, with related costs recorded as cost of revenues. The Company presents revenues net of any taxes collected from customers and remitted to government authorities. In the consolidated statements of operations, the Company classifies revenues as product revenues or services revenues. For multiple-element arrangements that include both product and service elements, including Implied Maintenance Release PCS, the Company evaluates available indicators of fair value and applies its judgment to reasonably classify the arrangement fee between product revenues and services revenues. The amount of multiple-element arrangement fees classified as product and service revenues based on management estimates of fair value when VSOE of fair value for all elements of an arrangement does not exist could differ from amounts classified as product and service revenues if VSOE of fair value for all elements existed. Allowance for Sales Returns and Exchanges The Company maintains allowances for estimated potential sales returns and exchanges from its customers. The Company records a provision for estimated returns and other allowances as a reduction of revenues in the same period that related revenues are recorded based on historical experience and specific customer analysis. Use of management estimates is required in connection with establishing and maintaining a sales allowance for expected returns and other credits. If actual returns differ from the estimates, additional allowances could be required. The following table sets forth the activity in the allowance for sales returns and exchanges for the years ended December 31, 2015, 2014 and 2013 (in thousands):
The allowance for sales returns and exchanges, which is recorded as a reduction to gross accounts receivable, reflects an estimate of amounts invoiced that will not be collected, as well as other allowances and credits that have been or are expected to offset the trade receivables. Since many of the Company’s transactions require some or all of amounts invoiced to be recorded in deferred revenue under GAAP due to revenue recognition considerations, the Company has recorded reductions to deferred revenue of $3.2 million, $3.7 million and $6.1 million as of December 31, 2015, 2014 and 2013, respectively, to eliminate the estimated deferred revenue attributable to transactions already provided for by the sales, returns and exchanges allowance. Allowances for Doubtful Accounts The Company maintains allowances for estimated losses from bad debt resulting from the inability of its customers to make required payments for products or services. When evaluating the adequacy of the allowances, the Company analyzes accounts receivable balances, historical bad debt experience, customer concentrations, customer credit worthiness and current economic trends. To date, actual bad debts have not differed materially from management’s estimates. |
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Foreign Currency Transactions and Translations Policy [Policy Text Block] | Translation of Foreign Currencies The functional currency of each of the Company’s foreign subsidiaries is the local currency, except for the Irish manufacturing branch whose functional currency is the U.S. dollar due to the extensive interrelationship of the operations of the Irish branch and the U.S. parent and the high volume of intercompany transactions between that branch and the parent. The assets and liabilities of the subsidiaries whose functional currencies are other than the U.S. dollar are translated into U.S. dollars at the current exchange rate in effect at the balance sheet date. Income and expense items for these entities are translated using rates that approximate those in effect during the period. Cumulative translation adjustments are included in accumulated other comprehensive income (loss), which is reflected as a separate component of stockholders’ deficit. The Company does not record tax provisions or benefits for the net changes in the foreign currency translation adjustment as the Company intends to permanently reinvest undistributed earnings in its foreign subsidiaries. The U.S. parent company and its Irish manufacturing branch, both of whose functional currency is the U.S. dollar, carry certain monetary assets and liabilities denominated in currencies other than the U.S. dollar. These assets and liabilities typically include cash, accounts receivable and intercompany operating balances denominated in foreign currencies. These assets and liabilities are remeasured into the U.S. dollar at the current exchange rate in effect at the balance sheet date. Foreign currency transaction and remeasurement gains and losses are included within marketing and selling expenses in the results of operations. See Note E for the net foreign exchange gains and losses recorded in the Company’s statements of operations during the years ended December 31, 2015, 2014 and 2013 that resulted from the gains and losses on Company’s foreign currency contracts and the revaluation of the related hedged items. The U.S. parent company and various other wholly owned subsidiaries have long-term intercompany loan balances denominated in foreign currencies that are remeasured into the U.S. dollar at the current exchange rate in effect at the balance sheet date. Such loan balances are not expected to be settled in the foreseeable future. Any gains and losses relating to these loans are included in the accumulated other comprehensive income (loss), which is reflected as a separate component of stockholders’ deficit. |
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Cash and Cash Equivalents, Policy [Policy Text Block] | Cash, Cash Equivalents and Marketable Securities The Company measures cash equivalents and marketable securities at fair value on a recurring basis. The cash equivalents and market securities consist primarily of money market investments, mutual funds and insurance contracts held in deferred compensation plans. The money market investments and mutual funds held in the Company’s deferred compensation plan in the U.S. are reported at fair value within other current assets using quoted market prices with the gains and losses included as other (expense) income in the Company’s statement of operations. The insurance contracts held in the deferred compensation plans for employees in Israel and Germany are reported at fair value within other long term assets using other observable inputs. Other than the investments held in the Company’s deferred compensation plans, the Company held no marketable securities at December 31, 2015 or 2014. Amortization or accretion of premium or discount is included in interest income (expense) in the results of operations. |
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Concentration of Credit Risk [Policy Text Block] | Concentration of Credit Risk Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash and cash equivalents, foreign currency contracts and accounts receivable. The Company places its cash and cash equivalents with financial institutions that management believes to be of high credit quality, and, generally, there are no significant concentrations in any one issuer. Concentrations of credit risk with respect to trade receivables are limited due to the large number of customers that make up the Company’s customer base and their dispersion across different regions. No individual customer accounted for 10% or more of the Company’s net revenues or net accounts receivable in the periods presented. |
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Derivatives, Policy [Policy Text Block] | Foreign Currency Risk The Company has significant international operations and, therefore, the Company’s revenues, earnings, cash flows and financial position are exposed to foreign currency risk from foreign-currency-denominated receivables, payables, sales and expense transactions, and net investments in foreign operations. The Company derives more than half of its revenues from customers outside the United States. This business is, for the most part, transacted through international subsidiaries and generally in the currency of the end-user customers. Therefore, the Company is exposed to the risks that changes in foreign currency could adversely affect its revenues, net income, cash flow and financial position. The Company uses derivatives in the form of foreign currency contracts to manage its short-term exposures to fluctuations in the foreign currency exchange rates that exist as part of its ongoing international business operations. The Company does not enter into any derivative instruments for trading or speculative purposes. The Company records all foreign currency contract derivatives on the balance sheet at fair value. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative, whether the Company has elected to designate a derivative in a hedging relationship and apply hedge accounting, and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting. Derivatives designated and qualifying as hedges of the exposure to changes in the fair value of an asset, liability or firm commitment attributable to a particular risk are considered fair value hedges. Derivatives designated and qualifying as hedges of the exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges. Derivatives may also be designated as hedges of the foreign currency exposure of a net investment in a foreign operation. Hedge accounting generally provides for the matching of the timing of gain or loss recognition on the hedging instrument with the recognition of the changes in the fair value of the hedged asset or liability that are attributable to the hedged risk in a fair value hedge or the earnings effect of the hedged forecasted transactions in a cash flow hedge. Under hedge accounting, the determination of hedge effectiveness is dependent upon whether the gain or loss on the hedging derivative is highly effective in offsetting the gain or loss in the value of the item being hedged. The Company has not accounted for any foreign currency contracts as hedges in the periods presented. |
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Inventory, Policy [Policy Text Block] | Inventories Inventories are stated at the lower of cost (determined on a first-in, first-out basis) or market value. Management regularly reviews inventory quantities on hand and writes down inventory to its realizable value to reflect estimated obsolescence or lack of marketability based on assumptions about future inventory demand and market conditions. Inventory in the digital-media market, including the Company’s inventory, is subject to rapid technological change or obsolescence; therefore, utilization of existing inventory may differ from the Company’s estimates. |
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Property, Plant and Equipment, Policy [Policy Text Block] | Property and Equipment Property and equipment is recorded at cost and depreciated using the straight-line method over the estimated useful life of the asset. The Company typically depreciates its property and equipment using the following minimum and maximum useful lives:
The Company capitalizes certain development costs incurred in connection with its internal use software. Costs incurred in the preliminary stages of development are expensed as incurred. Once an application has reached the development stage, internal and external costs, if direct, are capitalized until the software is substantially complete and ready for its intended use. Capitalized costs are recorded as part of property and equipment. Maintenance and training costs are expensed as incurred. Internal use software is amortized on a straight line basis over its estimated useful life, generally three years. Leasehold improvements are amortized over the shorter of the useful life of the improvement or the remaining term of the lease. Expenditures for maintenance and repairs are expensed as incurred. Upon retirement or other disposition of assets, the cost and related accumulated depreciation are eliminated from the accounts and the resulting gain or loss is reflected in other (expense) income in the results of operations. |
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Internal Use Software, Policy [Policy Text Block] | Internal use software is amortized on a straight line basis over its estimated useful life, generally three years. |
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Acquisition-Related Intangible Assets and Goodwill Policy [Policy Text Block] | Intangible Assets and Goodwill Acquisition-related intangible assets consist of customer relationships, developed technology, trade names and non-compete agreements. These assets are determined to have either finite or indefinite lives. For finite-lived intangible assets amortization is straight-line over the estimated useful lives of such assets, which are generally two years to twelve years. Straight-line amortization is used because the Company cannot reliably determine a discernible pattern over which the economic benefits would be realized. The Company does not have any indefinite-lived intangible assets. Intangible assets are tested for impairment when events and circumstances indicate there is an impairment. The impairment test involves comparing the sum of undiscounted cash flows to the carrying value as of the measurement date. Impairment occurs when the carrying value of the assets exceeds the sum of undiscounted cash flows. Impairment is then measured as the difference between the carrying value and fair value determined using a discounted cash flow method. In estimating the fair value using a discounted cash flow method, the Company uses assumptions that include forecast revenues, gross margins, operating profit margins, growth rates and long term discount rates, all of which require significant judgment by management. Changes to these assumptions could affect the estimated fair value of the intangible asset and could result in an impairment charge in future. |
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Impairment or Disposal of Long-Lived Assets, Policy [Policy Text Block] | Long-Lived Assets The Company periodically evaluates its long-lived assets for events and circumstances that indicate a potential impairment. A long-lived asset is assessed for impairment when the undiscounted expected future cash flows derived from that asset are less than its carrying value. The cash flows used for this analysis take into consideration a number of factors including past operating results, budgets and economic projections, market trends and product development cycles. The amount of any impairment would be equal to the difference between the estimated fair value of the asset, based on a discounted cash flow analysis, and its carrying value. |
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Advertising Costs, Policy [Policy Text Block] | Advertising Expenses All advertising costs are expensed as incurred and are classified as marketing and selling expenses. Advertising expenses were not material in the periods presented. |
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Research, Development, and Computer Software, Policy [Policy Text Block] | Research and Development Costs Research and development costs are expensed as incurred. Development costs for software to be sold that are incurred subsequent to the establishment of technological feasibility, but prior to the general release of the product, are capitalized. Upon general release, these costs are amortized using the straight-line method over the expected life of the related products, generally 12 to 36 months. The straight-line method generally results in approximately the same amount of expense as that calculated using the ratio that current period gross product revenues bear to total anticipated gross product revenues. The Company periodically evaluates the assets, considering a number of business and economic factors, to determine if an impairment exists. No amounts have been capitalized during 2015, 2014, and 2013 as the costs incurred subsequent to the establishment of technological feasibility have not been material. |
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Income Tax, Policy [Policy Text Block] | Income Taxes The Company accounts for income taxes using an asset and liability approach that requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the Company’s financial statements or tax returns. The Company records deferred tax assets and liabilities based on the net tax effects of tax credits, operating loss carryforwards and temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes compared to the amounts used for income tax purposes. Deferred tax assets are regularly reviewed for recoverability with consideration for such factors as historical losses, projected future taxable income and the expected timing of the reversals of existing temporary differences. The Company is required to record a valuation allowance when it is more likely than not that some portion or all of the deferred tax assets will not be realized. The Company accounts for uncertainty in income taxes recognized in its financial statements by applying a two-step process to determine the amount of tax benefit to be recognized. First, the tax position must be evaluated to determine the likelihood that it will be sustained upon examination by the taxing authorities, based on the technical merits of the position. If the tax position is deemed more-likely-than-not to be sustained, the tax position is then assessed to determine the amount of benefit to recognize in the financial statements. The amount of the benefit that may be recognized is the largest amount that has a greater than 50% likelihood of being realized upon ultimate settlement. The provision for income taxes includes the effects of any resulting tax reserves (“unrecognized tax benefits”) that are considered appropriate as well as the related net interest and penalties. |
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Share-based Compensation, Option and Incentive Plans Policy [Policy Text Block] | Accounting for Stock-Based Compensation The Company’s stock-based employee compensation plans allow the Company to grant stock awards, options, or other equity-based instruments, or a combination thereof, as part of its overall compensation strategy. For stock-based awards granted, the Company records stock-based compensation expense based on the grant date fair value over the requisite service periods for the individual awards, which generally equal the vesting periods. The vesting of stock-based award grants may be based on time, performance conditions, market conditions, or a combination of performance or market conditions. |
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Standard Product Warranty, Policy [Policy Text Block] | Product Warranties The Company provides warranties on externally sourced and internally developed hardware. The warranty period for all of the Company’s products is generally 90 days to one year, but can extend up to 5 years depending on the manufacturer’s warranty or local law. For internally developed hardware and in cases where the warranty granted to customers for externally sourced hardware is greater than that provided by the manufacturer, the Company records an accrual for the related liability based on historical trends and actual material and labor costs. At the end of each quarter, the Company reevaluates its estimates to assess the adequacy of the recorded warranty liabilities and adjusts the accrued amounts accordingly. |
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Earnings Per Share, Policy [Policy Text Block] | Computation of Net Income Per Share Net income per share is presented for both basic earnings per share (“Basic EPS”) and diluted earnings per share (“Diluted EPS”). Basic EPS is based on the weighted-average number of common shares outstanding during the period, excluding non-vested restricted stock held by employees. Diluted EPS is based on the weighted-average number of common and potential common shares outstanding during the period. Potential common shares result from the assumed exercise of outstanding stock options and non-vested restricted stock and restricted stock units, the proceeds and remaining unrecorded compensation expense of which are then assumed to have been used to repurchase outstanding common stock using the treasury stock method. For periods when the Company reports a loss, all potential common stock is considered anti-dilutive. For periods when the Company reports net income, potential common shares with combined purchase prices and unamortized compensation costs in excess of the Company’s average common stock fair value for the related period or that are contingently issuable are considered anti-dilutive. |
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Accounting for Restructuring Plans [Policy Text Block] | Accounting for Restructuring Plans The Company records facility-related and contract termination restructuring charges in accordance with ASC Topic 420, Liabilities: Exit or Disposal Cost Obligations. Based on the Company’s policies for the calculation and payment of severance benefits, the Company accounts for employee-related restructuring charges as an ongoing benefit arrangement in accordance with ASC Topic 712, Compensation - Nonretirement Postemployment Benefits. The Company recognizes facility-related restructuring charges upon exiting all or a portion of a leased facility and meeting cease-use and other requirements. The amount of restructuring charges is based on the fair value of the lease obligation for the abandoned space, which includes a sublease assumption that could be reasonably obtained. Restructuring charges and accruals require significant estimates and assumptions, including sub-lease income assumptions. These estimates and assumptions are monitored on at least a quarterly basis for changes in circumstances and any corresponding adjustments to the accrual are recorded in the Company’s statement of operations in the period when such changes are known. |
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Related Party Transactions Disclosure [Text Block] | Related Party Transactions From time to time the Company enters into arrangements with parties which may be affiliated with the Company, executive officers and members of the Company’s Board of Directors. These transactions are primarily comprised of sales transactions in the normal course of business and are immaterial to the financial statements for all periods presented. |
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New Accounting Pronouncements, Policy [Policy Text Block] | Recent Accounting Pronouncements On May 28, 2014, the Financial Accounting Standards Board (the “FASB”) and the International Accounting Standards Board (the “IASB”) issued substantially converged final standards on revenue recognition. The standard outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. The new revenue recognition guidance becomes effective for the Company on January 1, 2018, and early adoption as of January 1, 2017 is permitted. Entities have the option of using either a full retrospective or a modified approach to adopt the guidance in the Accounting Standards Update (“ASU”). The Company has not yet selected a transition method and is evaluating the effect that the updated standard will have on its consolidated financial statements and related disclosures. In April 2015, the FASB issued ASU No. 2015-03, Simplifying the Presentation of Debt Issuance Costs, which requires debt issuance costs to be presented in the balance sheet as a direct deduction from the carrying value of the associated debt liability. Early adoption is permitted for financial statements that have not been previously issued. The Company incurred transaction costs of $4.7 million relating to the issuance of the convertible senior notes, and has adopted the guidance in 2015. In accounting for the transaction costs, the Company allocated the costs of the offering between debt and equity in proportion to the fair value of the debt and equity recognized. The transaction costs allocated to the debt component of approximately $3.6 million were recorded as a direct deduction from the face amount of the convertible senior notes and are being amortized as interest expense over the term of the notes using the interest method. In August 2014, the FASB issued ASU 2014-15, Presentation of Financial Statements - Going Concern. ASU 2014-15 provides guidance around management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosures. For each reporting period, management will be required to evaluate whether there are conditions or events that raise substantial doubt about a company’s ability to continue as a going concern within one year from the date the financial statements are issued. The new standard is effective for the Company beginning January 1, 2017. Early adoption is permitted. The Company is evaluating the potential impact of adopting this standard on its financial statements. On November 20, 2015, the FASB issued ASU 2015-17, Balance Sheet Classification of Deferred Taxes. The standard requires entities to present all deferred tax assets (“DTAs”) and deferred tax liabilities (“DTLs”) as non-current in a classified balance sheet. The standard simplifies the current guidance, which requires entities to separately present DTAs and DTLs as current and non-current in a classified balance sheet. The new standard is effective for fiscal years and interim periods within those fiscal years, beginning December 15, 2016. Early adoption is permitted. The Company early adopted the guidance retrospectively, resulting in a $0.3 million reclassification of current DTAs to long-term DTAs in the consolidated balance sheet at December 31, 2014. On February 25, 2016, the FASB issued new lease accounting standard, ASU 2016-02, Leases (Topic 842). Lessees will need to recognize virtually all of their leases on the balance sheet, by recording a right-of-use asset and lease liability. The new guidance becomes effective for the Company on January 1, 2019, and early adoption is permitted upon issuance. The Company is evaluating the potential impact of adopting this standard on its financial statements. |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Allowance for Sales Returns and Exchanges (Tables) |
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Allowance for Sales Returns and Exchanges [Table Text Block] | The following table sets forth the activity in the allowance for sales returns and exchanges for the years ended December 31, 2015, 2014 and 2013 (in thousands):
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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Allowance for Doubtful Accounts (Tables) |
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Allowance for Doubtful Accounts [Table Text Block] | The following table sets forth the activity in the allowance for doubtful accounts for the years ended December 31, 2015, 2014 and 2013 (in thousands):
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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Property Plant And Equipment Useful Lives (Tables) |
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Dec. 31, 2015 | |||||||||||||||||||||||||||||||||||||||||
Property Plant and Equipment Useful Lives [Table Text Block] | Property and equipment is recorded at cost and depreciated using the straight-line method over the estimated useful life of the asset. The Company typically depreciates its property and equipment using the following minimum and maximum useful lives:
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ACQUISITION (Tables) |
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Schedule of Recognized Identified Assets Acquired and Liabilities Assumed [Table Text Block] | The following table summarizes the purchase price allocation to the fair value of the assets acquired and liabilities assumed at the date of acquisition (in thousands).
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Finite-Lived and Indefinite-Lived Intangible Assets Acquired as Part of Business Combination [Table Text Block] | The following table presents the identifiable intangible assets acquired and their respective weighted average useful lives (dollars in thousands):
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Condensed Financial Statements [Table Text Block] | The results of operations of Orad have been included in the results of operations of the Company since June 23, 2015, the date of acquisition. The net revenues and net loss for Orad, which are included in the Company’s consolidated statements of operations from the date of acquisition, were $13.1 million and $8.5 million, respectively, for the year ended December 31, 2015. The following unaudited pro forma financial information presents the Company’s results of operations for the years ended December 31, 2015 and 2014 as if the acquisition of Orad had occurred at the beginning of 2014. The pro forma financial information for the combined entities has been prepared for comparative purposes only and is not indicative of what actual results would have been if the acquisition had taken place at the beginning of fiscal 2014, or of future results.
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NET INCOME PER SHARE (Tables) |
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Earnings Per Share [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Antidilutive Securities Excluded From Computation of Earnings Per Share | The potential common shares that were considered anti-dilutive securities were excluded from the diluted earnings per share calculations for the relevant periods either because the sum of the exercise price per share and the unrecognized compensation cost per share was greater than the average market price of the Company’s common stock for the relevant period, or because they were considered contingently issuable. The contingently issuable potential common shares result from certain stock options and restricted stock units granted to the Company’s employees that vest based on performance conditions, market conditions, or a combination of performance or market conditions. The following table sets forth (in thousands) potential common shares that were considered anti-dilutive securities.
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FOREIGN CURRENCY FORWARD CONTRACTS (Tables) |
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Derivative Instruments and Hedging Activities Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance sheet locations, fair values and net gains and losses of foreign currency forward contracts | The following table sets forth the balance sheet classification and fair values of the Company’s foreign currency contracts (in thousands):
The following table sets forth the net foreign exchange gains (losses) recorded as marketing and selling expenses in the Company’s statements of operations during the years ended December 31, 2015, 2014 and 2013 that resulted from foreign currency forward contracts, foreign currency denominated transactions, and the revaluation of foreign currency denominated assets and liabilities (in thousands):
See Note F for additional information on the fair value measurements for all financial assets and liabilities, including derivative assets and derivative liabilities, that are measured at fair value on a recurring basis. |
FAIR VALUE MEASUREMENTS (Tables) |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Financial assets and liabilities measured at fair value on a recurring basis | The following tables summarize the Company’s fair value hierarchy for its financial assets and liabilities measured at fair value on a recurring basis (in thousands):
(1) Deferred compensation investments at December 31, 2015 included $2.4 million of funds that Orad invested in insurance contracts for the post-employment benefits that Orad employees earned. |
ACCOUNTS RECEIVABLE (Tables) |
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Receivables [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accounts receivable, net of allowances | Accounts receivable, net of allowances, consisted of the following at December 31, 2015 and 2014 (in thousands):
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INVENTORIES (Tables) |
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Inventory Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Inventories | Inventories consisted of the following at December 31, 2015 and 2014 (in thousands):
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PROPERTY AND EQUIPMENT (Tables) |
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Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property, Plant and Equipment [Table Text Block] | Property and equipment consisted of the following at December 31, 2015 and 2014 (in thousands):
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Schedule of property, plant and equipment | Property and equipment is recorded at cost and depreciated using the straight-line method over the estimated useful life of the asset. The Company typically depreciates its property and equipment using the following minimum and maximum useful lives:
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INTANGIBLE ASSETS AND GOODWILL (Tables) |
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Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Amortization of identifiable intangible assets | Amortizing identifiable intangible assets related to the Company’s acquisitions or capitalized costs of internally developed or externally purchased software that form the basis for the Company’s products consisted of the following at December 31, 2015 and 2014 (in thousands):
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OTHER LONG-TERM LIABILITIES (Tables) |
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Other Liabilities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other long-term liabilities | Other long-term liabilities consisted of the following at December 31, 2015 and 2014 (in thousands):
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COMMITMENTS AND CONTINGENCIES (Tables) |
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Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||
Future minimum lease commitments under non-cancelable leases | The future minimum lease commitments under these non-cancelable leases at December 31, 2015 were as follows (in thousands):
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Product warranty accrual activity | The following table sets forth the activity in the product warranty accrual account for the years ended December 31, 2015, 2014 and 2013 (in thousands):
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CAPITAL STOCK (Tables) |
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Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock option plans | Information with respect to options granted under all stock option plans for the year ended December 31, 2015 was as follows:
The following table sets forth the weighted-average key assumptions and fair value results for stock options granted during the years ended December 31, 2015, 2014 and 2013:
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Non-vested restricted stock and restricted units | Information with respect to non-vested restricted stock units for the year ended December 31, 2015 was as follows:
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Weighted-average key assumptions for shares issued under the ESPP | The following table sets forth the weighted-average key assumptions and fair value results for shares issued under the ESPP during the years ended December 31, 2015, 2014 and 2013:
The following table sets forth the quantities and average prices of shares issued under the ESPP for the years ended December 31, 2015, 2014 and 2013:
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Allocated share-based compensation expense | Stock-based compensation was included in the following captions in the Company’s consolidated statements of operations for the years ended December 31, 2015, 2014 and 2013, respectively (in thousands):
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INCOME TAXES (Tables) |
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Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Loss Before Income Taxes and Components of Income Tax Provision | Income from before income taxes and the components of the income tax provision consisted of the following for the years ended December 31, 2015, 2014 and 2013 (in thousands):
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Net Deferred Tax Assets (Liabilities) | Net deferred tax assets (liabilities) consisted of the following at December 31, 2015 and 2014 (in thousands):
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Reconciliation of Income Tax Provision to Statutory Rate | The following table sets forth a reconciliation of the Company’s income tax provision (benefit) to the statutory U.S. federal tax amount for the years ended December 31, 2015, 2014 and 2013:
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Reconciliation of Unrecognized Tax Benefits | The following table sets forth a reconciliation of the beginning and ending amounts of unrecognized tax benefits, excluding the impact of interest and penalties, for the years ended December 31, 2015, 2014 and 2013 (in thousands):
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RESTRUCTURING COSTS AND ACCRUALS (Tables) |
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Restructuring and Related Activities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Restructuring and Related Costs [Table Text Block] | The following table sets forth the activity in the restructuring accruals for the years ended December 31, 2015, 2014 and 2013 (in thousands):
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PRODUCT AND GEOGRAPHIC INFORMATION (Tables) |
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Reconciliation of Revenue from Segments to Consolidated | The following is a summary of the Company’s revenues by type for the years ended December 31, 2015, 2014 and 2013 (in thousands):
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Schedule of Revenues and Long-lived Assets By Geographic Areas | The following table sets forth the Company’s revenues from by geographic region for the years ended December 31, 2015, 2014 and 2013 (in thousands):
The following table presents the Company’s long-lived assets, excluding intangible assets, by geography at December 31, 2015 and 2014 (in thousands):
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LONG TERM DEBT AND CREDIT AGREEMENT Carrying Value of Notes Payable (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2015 | |||||||||||||||||||||||||||||||||||||
Schedule of Carrying Values and Estimated Fair Values of Debt Instruments [Table Text Block] | The net carrying amount of the liability component of the Notes consisted of the following at December 31, 2015 (in thousands):
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QUARTERLY RESULTS (UNAUDITED) (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Quarterly Financial Information Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Quarterly Results (Unaudited) | The following information has been derived from unaudited consolidated financial statements that, in the opinion of management, include all normal recurring adjustments necessary for a fair presentation of such information.
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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Allowance for Sales Returns and Exchanges (Details) - USD ($) $ in Thousands |
12 Months Ended | |||
---|---|---|---|---|
Dec. 31, 2015 |
Dec. 31, 2014 |
Dec. 31, 2013 |
Dec. 31, 2012 |
|
Allowance for sales returns and exchanges | $ 8,583 | $ 9,510 | $ 12,519 | $ 19,460 |
Additions to the allowance | 8,468 | 9,260 | 9,243 | |
Deductions against the allowance | (9,395) | (12,269) | (16,184) | |
Deferred revenue reduction [Member] | ||||
Allowance for sales returns and exchanges | $ 3,200 | $ 3,700 | $ 6,100 |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Allowance for Doubtful Accounts (Details) - USD ($) $ in Thousands |
12 Months Ended | |||
---|---|---|---|---|
Dec. 31, 2015 |
Dec. 31, 2014 |
Dec. 31, 2013 |
Dec. 31, 2012 |
|
Accounts receivable percentage not attained by individual customer | 10.00% | |||
Allowance for doubtful accounts | $ 643 | $ 1,182 | $ 1,444 | $ 1,517 |
Bad debt (recovery) expense | (23) | (143) | 157 | |
Reduction in provision for doubtful accounts | $ (516) | $ (119) | $ (230) |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Discontinued Operations (Details) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2015 |
Dec. 31, 2014 |
Dec. 31, 2013 |
|
Proceeds from Sale of Productive Assets | $ 0 | $ 1,500 | $ 0 |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Revenue Recognition (Details) $ in Millions |
12 Months Ended |
---|---|
Dec. 31, 2015
USD ($)
| |
New Accounting Pronouncement or Change in Accounting Principle, Effect of Change on Net Revenue | $ 13.0 |
Recognition of Deferred Revenue | $ 9.5 |
ACQUISITION (Details) - Jun. 23, 2015 $ in Millions |
€ / shares |
USD ($) |
---|---|---|
Business Acquisition, Share Price | € / shares | € 5.67 | |
Value of Business Acquired (VOBA) | $ 66.0 | |
Business Acquisition, Transaction Costs | $ 5.7 |
ACQUISITION Pro Forma Financial Information (Details) - Orad Hi-Tech Systems Ltd. [Member] - USD ($) $ / shares in Units, $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2015 |
Dec. 31, 2014 |
|
Business Acquisition, Pro Forma Net Income (Loss) | $ 520,918 | $ 570,766 |
Business Acquisition, Pro Forma Net Income (Loss) | $ (2,300) | $ 8,638 |
Business Acquisition, Pro Forma Earnings Per Share, Basic | $ (0.06) | $ 0.22 |
Business Acquisition, Pro Forma Earnings Per Share, Diluted | $ (0.06) | $ 0.22 |
NET INCOME PER SHARE (Details) - shares shares in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2015 |
Dec. 31, 2014 |
Dec. 31, 2013 |
|
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | |||
Anti-dilutive potential common shares (in thousands of shares) | 2,371 | 4,866 | 5,545 |
Stock options [Member] | |||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | |||
Anti-dilutive potential common shares (in thousands of shares) | 1,901 | 4,748 | 5,193 |
Non-vested restricted stock units [Member] | |||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | |||
Anti-dilutive potential common shares (in thousands of shares) | 470 | 118 | 352 |
ACCOUNTS RECEIVABLE (Details) - USD ($) $ in Thousands |
Dec. 31, 2015 |
Dec. 31, 2014 |
Dec. 31, 2013 |
Dec. 31, 2012 |
---|---|---|---|---|
Less: | ||||
Allowance for sales returns and rebates | $ 8,583 | $ 9,510 | $ 12,519 | $ 19,460 |
Accounts receivable, net | 58,807 | 54,655 | ||
Trade Accounts Receivable [Member] | ||||
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||||
Accounts receivable, gross | 68,033 | 65,347 | ||
Less: | ||||
Allowance for doubtful accounts | (643) | (1,182) | ||
Allowance for sales returns and rebates | $ (8,583) | $ (9,510) |
INVENTORIES (Details) - USD ($) $ in Thousands |
Dec. 31, 2015 |
Dec. 31, 2014 |
---|---|---|
Inventory [Line Items] | ||
Raw materials | $ 9,594 | $ 9,942 |
Work in process | 256 | 248 |
Finished Goods | 38,223 | 37,811 |
Total inventory | 48,073 | 48,001 |
Finished goods, consigned | $ 5,300 | $ 4,300 |
PROPERTY AND EQUIPMENT Acquisitions and Disposals (Details) - USD ($) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2015 |
Dec. 31, 2014 |
Dec. 31, 2013 |
|
Significant Acquisitions and Disposals [Line Items] | |||
Annual Depreciation | $ 13.7 | $ 16.1 | $ 17.8 |
OTHER LONG-TERM LIABILITIES (Details) - USD ($) $ in Thousands |
Dec. 31, 2015 |
Dec. 31, 2014 |
---|---|---|
Other Liabilities Disclosure [Abstract] | ||
Long-term deferred rent | $ 6,755 | $ 8,236 |
Long-term accrued restructuring | 647 | 1,334 |
Long-term deferred compensation | 7,309 | 4,703 |
Total long-term liabilities | $ 14,711 | $ 14,273 |
CAPITAL STOCK (Details) - USD ($) $ / shares in Units, $ in Millions |
3 Months Ended | 12 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2015 |
Dec. 31, 2015 |
Jun. 08, 2015 |
Nov. 30, 2014 |
|
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Preferred stock authorized (in shares) | 1,000,000 | |||
Par value per share of preferred stock (in dollars per share) | $ 0.01 | |||
Common Stock, Par or Stated Value Per Share | $ 0.01 | |||
Stock Repurchase Program, Authorized Amount | $ 9.0 | |||
Stock repurchased (in shares) | 586,825 | |||
Stock Incentive Plans [Abstract] | ||||
Shares available for issuance | 2,213,283 | |||
Non-employee Director [Member] | ||||
Stock Incentive Plans [Abstract] | ||||
Vesting period, maximum (in years) | 1 year | |||
Employee Stock Purchase Plan [Member] | ||||
Stock Incentive Plans [Abstract] | ||||
Shares available for issuance | 343,613 |
CAPITAL STOCK CAPITAL STOCK, Stock Repurchase (Details) - USD ($) $ in Thousands |
3 Months Ended | 12 Months Ended | |||
---|---|---|---|---|---|
Sep. 30, 2015 |
Dec. 31, 2015 |
Dec. 31, 2014 |
Dec. 31, 2013 |
Jun. 08, 2015 |
|
Equity, Class of Treasury Stock [Line Items] | |||||
Stock Repurchase Program, Authorized Amount | $ 9,000 | ||||
Repurchase of common stock (in shares) | 586,825 | ||||
Total purchase price of shares repurchased | $ 8,000 | ||||
Proceeds from (Payments for) Other Financing Activities | $ 5,035 | $ 252 | $ 177 |
EMPLOYEE BENEFIT PLANS (Details) - USD ($) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2015 |
Dec. 31, 2014 |
Dec. 31, 2013 |
|
401(k) Plan [Member] | |||
Employee Benefit Plans [Abstract] | |||
Contributions to the plan | $ 2.3 | $ 2.2 | $ 2.2 |
International Retirement and Post-employment Plans [Member] | |||
Employee Benefit Plans [Abstract] | |||
Contributions to international employees retirement and post-employment plans | $ 2.2 | $ 2.0 | $ 1.2 |
EMPLOYEE BENEFIT PLANS Deferred Compensation Plans (Details) - USD ($) $ in Millions |
Dec. 31, 2015 |
Dec. 31, 2014 |
---|---|---|
Management and Directors Deferred Compensation Plan [Member] | ||
Deferred Compensation Arrangement with Individual, Postretirement Benefits [Line Items] | ||
Assets of the deferred compensation plan | $ 0.6 | $ 1.2 |
Acquired Individual Deferred Compensation Arrangement [Member] | ||
Deferred Compensation Arrangement with Individual, Postretirement Benefits [Line Items] | ||
Assets of the deferred compensation plan | 3.0 | |
Liabilities of deferred compensation plan | $ 7.3 | $ 4.7 |
INCOME TAXES Deferred Tax Liability Not Recognized (Details) - USD ($) $ in Millions |
Dec. 31, 2015 |
Dec. 31, 2014 |
Dec. 31, 2013 |
---|---|---|---|
Deferred Tax Liability [Line Items] | |||
Unrecognized Tax Benefits that Would Impact Effective Tax Rate | $ 3.2 | $ 0.8 | $ 0.8 |
Unrecognized tax benefits including penalties and interest | 26.0 | $ 25.8 | $ 24.7 |
Cumulative amount of undistributed earnings of foreign subsidiaries | $ 38.5 |
LONG TERM DEBT AND CREDIT AGREEMENT (Details) - USD ($) $ in Thousands |
9 Months Ended | 12 Months Ended | ||||
---|---|---|---|---|---|---|
Feb. 26, 2016 |
Sep. 30, 2015 |
Dec. 31, 2015 |
Dec. 31, 2014 |
Dec. 31, 2013 |
Jun. 15, 2015 |
|
Credit Facilities [Line Items] | ||||||
Interest Expense | $ 6,346 | $ 1,771 | $ 1,574 | |||
Increase (Decrease) in Deferred Income Taxes | 6,693 | (69) | (730) | |||
Capped Call Transaction Costs | (10,125) | 0 | 0 | |||
Long-term debt | 95,950 | 0 | ||||
Repayments of Lines of Credit | 65,500 | $ 25,500 | $ 0 | |||
Convertible Debt [Member] | ||||||
Credit Facilities [Line Items] | ||||||
Convertible Notes Payable, Noncurrent | $ 125,000 | $ 125,000 | ||||
Net Proceeds from Issuance of Convertible Notes Payable | 120,300 | |||||
Debt Instrument, Convertible, Terms of Conversion Feature | The Notes are convertible into cash, shares of the Company’s common stock or a combination of cash and shares of common stock, at the Company’s election, based on an initial conversion rate, subject to adjustment, of 45.5840 shares per $1,000 principal amount of Notes, which is equal to an initial conversion price of $21.94 per share. Prior to December 15, 2019, the Notes are convertible only in the following circumstances: (1) during any calendar quarter commencing after September 30, 2015, if the last reported sale price of the Company’s common stock is greater than or equal to 130% of the applicable conversion price for at least 20 trading days during a period of 30 consecutive trading days ending on the last trading day of the preceding calendar quarter; (2) during the five business day period after any five consecutive trading day period (the “Measurement Period”) in which the trading price per $1,000 principal amount of Notes for each trading day in the Measurement Period was less than 98% of the product of the last reported sale price of the Company’s common stock and the conversion rate on such trading day; or (3) upon the occurrence of specified corporate transactions. | |||||
Convertible Debt, Noncurrent | $ 95,950 | $ 96,700 | ||||
Adjustments to Additional Paid in Capital, Equity Component of Convertible Debt, Subsequent Adjustments | $ 28,300 | |||||
Debt Instrument, Interest Rate, Effective Percentage | 7.66% | |||||
Accretion of Discount | 2,900 | |||||
Interest Expense | 4,300 | |||||
Increase (Decrease) in Deferred Income Taxes | $ 6,500 | |||||
Convertible Notes Payable Transaction Costs | $ (3,641) | |||||
Convertible Debt [Member] | Capped call [Member] | ||||||
Credit Facilities [Line Items] | ||||||
Debt Instrument, Call Feature | The Capped Call has a strike price of $21.94 and a cap price of $26.00 and is exercisable by the Company when and if the Notes are converted. | |||||
Capped Call Transaction Costs | $ 10,100 | |||||
Line of credit [Member] | KeyBank National Association [Member] | ||||||
Credit Facilities [Line Items] | ||||||
Line of Credit Facility, Maximum Borrowing Capacity | $ 35,000 | |||||
Subsequent Event [Member] | Cerberus Business Finance [Member] | ||||||
Credit Facilities [Line Items] | ||||||
Credit facilities, interest rate description | Interest accrues on outstanding borrowings under the Credit Facility and the Term Loan at a rate of either the LIBOR Rate (as defined in the Financing Agreement) plus 6.75% or a Reference Rate (as defined in the Financing Agreement) plus 5.75%, at the option of the Company. The Company must also pay to the Lenders, on a monthly basis, an unused line fee at a rate of 0.5% per annum. | |||||
Line of Credit Facility, Frequency of Payments | The Company may prepay all or any portion of the Term Loan prior to its stated maturity, subject to the payment of certain fees based on the amount repaid. The Term Loan requires quarterly principal payments of $1.25 million commencing in June 2016. The Term Loan also requires the Company to use excess cash, as defined in the Financing Agreement, to repay outstanding principal | |||||
Debt Instrument, Covenant Description | The Financing Agreement contains customary representations and warranties, covenants, mandatory prepayments, and events of default under which the Company’s payment obligations may be accelerated. The Financing Agreement includes covenants requiring the Company to maintain a Leverage Ratio (defined as the ratio of (a) consolidated total funded indebtedness to (b) consolidated Adjusted EBITDA) of no greater than 4.35:1.00 for the four quarters ending June 30, 2016, 5.40:1.00 for the four quarters ending September 30, 2016, 4.20:1.00 for the four quarters ending December 31, 2016 and thereafter declining over time from 3.50:1.00 to 2.50:1.00. The Financing Agreement also restricts the Company from making capital expenditures in excess of $20,000,000 in any fiscal year. | |||||
Line of Credit Facility, Collateral | The Company granted a security interest on substantially all of their assets to secure the obligations under the Credit Facility and the Term Loan. | |||||
Debt Instrument, Restrictive Covenants | The Financing Agreement contains restrictive covenants that are customary for an agreement of this kind, including, for example, covenants that restrict the Company from incurring additional indebtedness, granting liens, making investments and restricted payments, making acquisitions, paying dividends and engaging in transactions with affiliates. | |||||
Subsequent Event [Member] | Long-term debt [Member] | Cerberus Business Finance [Member] | ||||||
Credit Facilities [Line Items] | ||||||
Line of Credit Facility, Current Borrowing Capacity | $ 100,000 | |||||
Long-term debt | 100,000 | |||||
Subsequent Event [Member] | Line of credit [Member] | Cerberus Business Finance [Member] | ||||||
Credit Facilities [Line Items] | ||||||
Line of Credit Facility, Maximum Borrowing Capacity | $ 5,000 | |||||
Convertible Debt [Member] | ||||||
Credit Facilities [Line Items] | ||||||
Convertible Notes Payable Transaction Costs | $ 4,700 | |||||
Convertible Debt [Member] | Interest Expense [Member] | ||||||
Credit Facilities [Line Items] | ||||||
Convertible Notes Payable Transaction Costs | 3,600 | |||||
Convertible Debt [Member] | Equity [Member] | ||||||
Credit Facilities [Line Items] | ||||||
Convertible Notes Payable Transaction Costs | $ 1,100 |
LONG TERM DEBT AND CREDIT AGREEMENT Carrying Value of Notes Payable (Details) - Convertible Debt [Member] - USD ($) $ in Thousands |
9 Months Ended | 12 Months Ended | |
---|---|---|---|
Sep. 30, 2015 |
Dec. 31, 2015 |
Jun. 15, 2015 |
|
Convertible Notes Payable, Noncurrent | $ 125,000 | $ 125,000 | |
Debt Instrument, Unamortized Discount | (28,299) | ||
Convertible Notes Payable Transaction Costs | (3,641) | ||
Convertible Notes Payable Accumulated Accretion | 2,890 | ||
Convertible Debt, Noncurrent | 95,950 | $ 96,700 | |
Adjustments to Additional Paid in Capital, Equity Component of Convertible Debt, Subsequent Adjustments | $ 28,300 | ||
Debt Instrument, Interest Rate, Effective Percentage | 7.66% | ||
Accretion of Discount | $ 2,900 | ||
Debt Instrument, Interest Rate, Stated Percentage | 2.00% |
QUARTERLY RESULTS (UNAUDITED) (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands |
3 Months Ended | 12 Months Ended | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2015 |
Sep. 30, 2015 |
Jun. 30, 2015 |
Mar. 31, 2015 |
Dec. 31, 2014 |
Sep. 30, 2014 |
Jun. 30, 2014 |
Mar. 31, 2014 |
Dec. 31, 2015 |
Dec. 31, 2014 |
Dec. 31, 2013 |
|
Net revenues | $ 138,806 | $ 137,436 | $ 109,767 | $ 119,586 | $ 128,196 | $ 142,429 | $ 124,644 | $ 134,982 | $ 505,595 | $ 530,251 | $ 563,412 |
Cost of revenues | 54,912 | 47,672 | 43,306 | 47,492 | 50,548 | 52,788 | 50,420 | 50,665 | |||
Cost of products | 131,881 | 143,765 | 159,264 | ||||||||
Cost of services | 61,501 | 60,656 | 63,177 | ||||||||
Amortization of intangible assets | 1,950 | 1,950 | 163 | 0 | 0 | 0 | 0 | 50 | 4,063 | 50 | 1,468 |
Gross profit | 81,944 | 87,814 | 66,298 | 72,094 | 77,648 | 89,641 | 74,224 | 84,267 | 308,150 | 325,780 | 339,503 |
Operating expenses: | |||||||||||
Research and development | 24,190 | 25,225 | 23,310 | 23,173 | 23,212 | 22,154 | 22,070 | 22,954 | 95,898 | 90,390 | 95,249 |
Marketing and selling | 30,091 | 31,564 | 32,811 | 28,045 | 34,527 | 31,410 | 34,297 | 32,815 | 122,511 | 133,049 | 133,890 |
General and administrative | 21,463 | 15,834 | 17,425 | 19,387 | 22,222 | 20,644 | 19,984 | 18,331 | 74,109 | 81,181 | 77,578 |
Amortization of intangible assets | 786 | 786 | 408 | 374 | 375 | 373 | 398 | 480 | 2,354 | 1,626 | 2,648 |
Restructuring costs (recoveries), net | 5,766 | 0 | 539 | 0 | 0 | 0 | (165) | 0 | 6,305 | (165) | 5,370 |
Total operating expenses | 82,296 | 73,409 | 74,493 | 70,979 | 80,336 | 74,581 | 76,584 | 74,580 | 301,177 | 306,081 | 314,735 |
Operating (loss) income | (352) | 14,405 | (8,195) | 1,115 | (2,688) | 15,060 | (2,360) | 9,687 | 6,973 | 19,699 | 24,768 |
Other (expense) income, net | (1,727) | (2,519) | (1,439) | (723) | (1,620) | (455) | (357) | (351) | (175) | (1,138) | 343 |
(Loss) income before income taxes | (2,079) | 11,886 | (9,634) | 392 | (4,308) | 14,605 | (2,717) | 9,336 | 565 | 16,916 | 24,092 |
Provision for (benefit from) income taxes | 2,306 | 768 | (5,550) | 561 | 761 | 365 | 622 | 440 | (1,915) | 2,188 | 2,939 |
Net (loss) income | $ (4,385) | $ 11,118 | $ (4,084) | $ (169) | $ (5,069) | $ 14,240 | $ (3,339) | $ 8,896 | $ 2,480 | $ 14,728 | $ 21,153 |
(Loss) income per common share - basic and diluted | $ (0.11) | $ 0.28 | $ (0.10) | $ 0.00 | $ (0.13) | $ 0.36 | $ (0.09) | $ 0.23 | $ 0.06 | $ 0.38 | $ 0.54 |
Weighted-average common shares outstanding - basic | 39,439 | 39,231 | 39,635 | 39,387 | 39,234 | 39,133 | 39,119 | 39,099 | 39,423 | 39,147 | 39,044 |
Weighted-average common shares outstanding - diluted | 39,439 | 39,750 | 39,635 | 39,387 | 39,234 | 39,201 | 39,119 | 39,122 | 40,380 | 39,267 | 39,070 |
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