(Mark One) | |||
x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||
For the quarterly period ended March 31, 2017 | |||
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.) |
Large Accelerated Filer ¨ Non-accelerated Filer ¨ (Do not check if smaller reporting company) | Accelerated Filer x Smaller Reporting Company ¨ Emerging growth company ¨ |
Page | ||
• | our ability to successfully implement our Avid Everywhere strategic plan and other strategic initiatives, including our cost saving strategies; |
• | the anticipated trends and developments in our markets and the success of our products in these markets; |
• | our ability to develop, market and sell new products and services; |
• | our business strategies and market positioning; |
• | our ability to achieve our goal of expanding our market positions; |
• | 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; |
• | the expected timing of recognition of revenue backlog as revenue, and the timing of recognition of revenues from subscription offerings; |
• | our ability to successfully consummate acquisitions, or investment transactions and successfully integrate acquired businesses, including 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 performance of our products; |
• | changes in inventory levels; |
• | plans regarding repatriation of foreign earnings; |
• | 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, including Brexit; |
• | our ability to accelerate growth of our Cloud-enabled Avid Everywhere platform; |
• | our compliance with covenants contained in the agreements governing our indebtedness; |
• | our ability to service our debt and meet the obligations thereunder, including our ability to satisfy our conversion and repurchase obligations under our convertible notes due 2020; |
• | seasonal factors; |
• | fluctuations in foreign exchange and interest rates; |
• | our ability to effectively mitigate and remediate the material weakness in our internal control over financial reporting, and the expected timing thereof; |
• | the risk of restatement of our financial statements; |
• | estimated asset and liability values and amortization of our intangible assets; |
• | our capital resources and the adequacy thereof; and |
• | worldwide political uncertainty, in particular the risk that the United States may withdraw from or materially modify NAFTA or other international trade agreements. |
ITEM 1. | CONDENSED CONSOLIDATED FINANCIAL STATEMENTS |
Three Months Ended | |||||||
March 31, | |||||||
2017 | 2016 | ||||||
Net revenues: | |||||||
Products | $ | 51,006 | $ | 84,509 | |||
Services | 53,101 | 59,038 | |||||
Total net revenues | 104,107 | 143,547 | |||||
Cost of revenues: | |||||||
Products | 24,504 | 27,124 | |||||
Services | 14,094 | 14,409 | |||||
Amortization of intangible assets | 1,950 | 1,950 | |||||
Total cost of revenues | 40,548 | 43,483 | |||||
Gross profit | 63,559 | 100,064 | |||||
Operating expenses: | |||||||
Research and development | 18,888 | 21,405 | |||||
Marketing and selling | 25,811 | 31,619 | |||||
General and administrative | 14,431 | 17,719 | |||||
Amortization of intangible assets | 363 | 786 | |||||
Restructuring costs, net | 983 | 2,777 | |||||
Total operating expenses | 60,476 | 74,306 | |||||
Operating income | 3,083 | 25,758 | |||||
Interest and other expense, net | (4,846 | ) | (4,183 | ) | |||
(Loss) income before income taxes | (1,763 | ) | 21,575 | ||||
Provision for income taxes | 152 | 635 | |||||
Net (loss) income | $ | (1,915 | ) | $ | 20,940 | ||
Net (loss) income per common share – basic and diluted | $ | (0.05 | ) | $ | 0.53 | ||
Weighted-average common shares outstanding – basic | 40,772 | 39,566 | |||||
Weighted-average common shares outstanding – diluted | 40,772 | 39,640 |
Three Months Ended | |||||||
March 31, | |||||||
2017 | 2016 | ||||||
Net (loss) income | $ | (1,915 | ) | $ | 20,940 | ||
Other comprehensive income: | |||||||
Foreign currency translation adjustments | 1,850 | 3,245 | |||||
Comprehensive (loss) income | $ | (65 | ) | $ | 24,185 |
March 31, 2017 | December 31, 2016 | ||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 47,014 | $ | 44,948 | |||
Accounts receivable, net of allowances of $8,886 and $8,618 at March 31, 2017 and December 31, 2016, respectively | 43,626 | 43,520 | |||||
Inventories | 49,128 | 50,701 | |||||
Prepaid expenses | 12,008 | 6,031 | |||||
Other current assets | 5,733 | 5,805 | |||||
Total current assets | 157,509 | 151,005 | |||||
Property and equipment, net | 28,414 | 30,146 | |||||
Intangible assets, net | 20,620 | 22,932 | |||||
Goodwill | 32,643 | 32,643 | |||||
Long-term deferred tax assets, net | 1,265 | 1,245 | |||||
Other long-term assets | 9,913 | 11,610 | |||||
Total assets | $ | 250,364 | $ | 249,581 | |||
LIABILITIES AND STOCKHOLDERS’ DEFICIT | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 28,844 | $ | 26,435 | |||
Accrued compensation and benefits | 27,843 | 25,387 | |||||
Accrued expenses and other current liabilities | 31,929 | 34,088 | |||||
Income taxes payable | 1,162 | 1,012 | |||||
Short-term debt | 5,000 | 5,000 | |||||
Deferred revenues | 144,425 | 146,014 | |||||
Total current liabilities | 239,203 | 237,936 | |||||
Long-term debt | 189,302 | 188,795 | |||||
Long-term deferred tax liabilities, net | 543 | 913 | |||||
Long-term deferred revenues | 78,608 | 79,670 | |||||
Other long-term liabilities | 11,644 | 12,178 | |||||
Total liabilities | 519,300 | 519,492 | |||||
Contingencies (Note 7) | |||||||
Stockholders’ deficit: | |||||||
Common stock | 423 | 423 | |||||
Additional paid-in capital | 1,041,005 | 1,043,063 | |||||
Accumulated deficit | (1,273,063 | ) | (1,271,148 | ) | |||
Treasury stock at cost | (29,255 | ) | (32,353 | ) | |||
Accumulated other comprehensive loss | (8,046 | ) | (9,896 | ) | |||
Total stockholders’ deficit | (268,936 | ) | (269,911 | ) | |||
Total liabilities and stockholders’ deficit | $ | 250,364 | $ | 249,581 |
Three Months Ended | |||||||
March 31, | |||||||
2017 | 2016 | ||||||
Cash flows from operating activities: | |||||||
Net (loss) income | $ | (1,915 | ) | $ | 20,940 | ||
Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities: | |||||||
Depreciation and amortization | 5,815 | 6,347 | |||||
(Recovery) provision for doubtful accounts | (110 | ) | 319 | ||||
Stock-based compensation expense | 1,411 | 2,087 | |||||
Non-cash interest expense | 3,131 | 3,878 | |||||
Unrealized foreign currency transaction losses | 1,722 | 2,936 | |||||
Benefit from deferred taxes | (374 | ) | (784 | ) | |||
Changes in operating assets and liabilities: | |||||||
Accounts receivable | 14 | 14,800 | |||||
Inventories | 1,573 | (3,579 | ) | ||||
Prepaid expenses and other current assets | (5,850 | ) | (4,061 | ) | |||
Accounts payable | 2,388 | (14,216 | ) | ||||
Accrued expenses, compensation and benefits and other liabilities | (1,773 | ) | (960 | ) | |||
Income taxes payable | 164 | 1,093 | |||||
Deferred revenues | (2,662 | ) | (40,009 | ) | |||
Net cash provided by (used in) operating activities | 3,534 | (11,209 | ) | ||||
Cash flows from investing activities: | |||||||
Purchases of property and equipment | (1,729 | ) | (4,518 | ) | |||
Increase in other long-term assets | (7 | ) | (8 | ) | |||
Decrease (increase) in restricted cash | 1,700 | (4,544 | ) | ||||
Net cash used in investing activities | (36 | ) | (9,070 | ) | |||
Cash flows from financing activities: | |||||||
Proceeds from long-term debt | — | 100,000 | |||||
Repayment of debt | (1,250 | ) | — | ||||
Proceeds from the issuance of common stock under employee stock plans | 2 | — | |||||
Common stock repurchases for tax withholdings for net settlement of equity awards | (372 | ) | (307 | ) | |||
Proceeds from revolving credit facilities | — | 25,000 | |||||
Payments on revolving credit facilities | — | (30,000 | ) | ||||
Payments for credit facility issuance costs | — | (4,919 | ) | ||||
Net cash (used in) provided by financing activities | (1,620 | ) | 89,774 | ||||
Effect of exchange rate changes on cash and cash equivalents | 188 | 433 | |||||
Net increase in cash and cash equivalents | 2,066 | 69,928 | |||||
Cash and cash equivalents at beginning of period | 44,948 | 17,902 | |||||
Cash and cash equivalents at end of period | $ | 47,014 | $ | 87,830 | |||
Supplemental information: | |||||||
Cash paid for income taxes, net of refunds | $ | 19 | $ | 600 | |||
Cash paid for interest | 1,665 | 353 | |||||
Non-cash financing activities: | |||||||
Issuance costs for long-term debt | $ | — | $ | 363 |
1. | FINANCIAL INFORMATION |
• | 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. |
2. | NET INCOME PER SHARE |
March 31, 2017 | March 31, 2016 | ||||
Options | 2,654 | 4,313 | |||
Non-vested restricted stock units | 2,613 | 786 | |||
Anti-dilutive potential common shares | 5,267 | 5,099 |
3. | FAIR VALUE MEASUREMENTS |
Fair Value Measurements at Reporting Date Using | |||||||||||||||
March 31, 2017 | 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 assets | $ | 1,948 | $ | 438 | $ | 1,510 | $ | — |
Fair Value Measurements at Reporting Date Using | |||||||||||||||
December 31, 2016 | 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 assets | $ | 2,035 | $ | 493 | $ | 1,542 | $ | — |
4. | INVENTORIES |
March 31, 2017 | December 31, 2016 | ||||||
Raw materials | $ | 11,281 | $ | 10,481 | |||
Work in process | 368 | 291 | |||||
Finished goods | 37,479 | 39,929 | |||||
Total | $ | 49,128 | $ | 50,701 |
5. | INTANGIBLE ASSETS AND GOODWILL |
March 31, 2017 | December 31, 2016 | ||||||||||||||||||||||
Gross | Accumulated Amortization | Net | Gross | Accumulated Amortization | Net | ||||||||||||||||||
Completed technologies and patents | $ | 58,059 | $ | (40,671 | ) | $ | 17,388 | $ | 57,994 | $ | (38,657 | ) | $ | 19,337 | |||||||||
Customer relationships | 54,631 | (51,399 | ) | 3,232 | 54,597 | (51,002 | ) | 3,595 | |||||||||||||||
Trade names | 1,346 | (1,346 | ) | — | 1,346 | (1,346 | ) | — | |||||||||||||||
Capitalized software costs | 4,911 | (4,911 | ) | — | 4,911 | (4,911 | ) | — | |||||||||||||||
Total | $ | 118,947 | $ | (98,327 | ) | $ | 20,620 | $ | 118,848 | $ | (95,916 | ) | $ | 22,932 |
6. | OTHER LONG-TERM LIABILITIES |
March 31, 2017 | December 31, 2016 | ||||||
Deferred rent | $ | 5,140 | $ | 5,458 | |||
Accrued restructuring | 1,026 | 1,256 | |||||
Deferred compensation | 5,478 | 5,464 | |||||
Total | $ | 11,644 | $ | 12,178 |
7. | CONTINGENCIES |
Three Months Ended March 31, | |||||||
2017 | 2016 | ||||||
Accrual balance at beginning of year | $ | 2,518 | $ | 2,234 | |||
Accruals for product warranties | 806 | 455 | |||||
Costs of warranty claims | (634 | ) | (455 | ) | |||
Accrual balance at end of period | $ | 2,690 | $ | 2,234 |
8. | RESTRUCTURING COSTS AND ACCRUALS |
Employee- Related | Facilities/Other-Related | Total | |||||||||
Accrual balance as of December 31, 2016 | $ | 7,018 | $ | 3,093 | $ | 10,111 | |||||
New restructuring charges – operating expenses | 1,265 | 216 | 1,481 | ||||||||
Revisions of estimated liabilities | (541 | ) | 43 | (498 | ) | ||||||
Accretion | — | 88 | 88 | ||||||||
Cash payments | (1,902 | ) | (740 | ) | (2,642 | ) | |||||
Foreign exchange impact on ending balance | (19 | ) | 2 | (17 | ) | ||||||
Accrual balance as of March 31, 2017 | $ | 5,821 | $ | 2,702 | $ | 8,523 |
9. | PRODUCT AND GEOGRAPHIC INFORMATION |
Three Months Ended March 31, | |||||||
2017 | 2016 | ||||||
Video products and solutions net revenues | $ | 28,821 | $ | 34,569 | |||
Audio products and solutions net revenues | 22,185 | 49,940 | |||||
Products and solutions net revenues | 51,006 | 84,509 | |||||
Services net revenues | 53,101 | 59,038 | |||||
Total net revenues | $ | 104,107 | $ | 143,547 |
Three Months Ended March 31, | |||||||
2017 | 2016 | ||||||
Revenues: | |||||||
United States | $ | 36,780 | $ | 55,042 | |||
Other Americas | 6,791 | 10,738 | |||||
Europe, Middle East and Africa | 42,135 | 55,739 | |||||
Asia-Pacific | 18,401 | 22,028 | |||||
Total net revenues | $ | 104,107 | $ | 143,547 |
10. | LONG TERM DEBT AND CREDIT AGREEMENT |
March 31, 2017 | December 31, 2016 | ||||||
Term Loan, net of unamortized debt issuance costs of $3,743 at March 31, 2017 and $4,042 at December 31, 2016 | $ | 91,257 | $ | 92,208 | |||
Notes, net of unamortized original issue discount and debt issuance costs of $21,955 at March 31, 2017 and $23,413 at December 31, 2016, respectively | 103,045 | 101,587 | |||||
Total debt | 194,302 | 193,795 | |||||
Less: current portion | 5,000 | 5,000 | |||||
Total long-term debt | $ | 189,302 | $ | 188,795 |
Time-Based Shares | Performance-Based Shares | Total Shares | Weighted- Average Exercise Price | Weighted- Average Remaining Contractual Term (years) | Aggregate Intrinsic Value (in thousands) | ||||
Options outstanding at January 1, 2017 | 2,847,502 | — | 2,847,502 | $10.43 | |||||
Exercised | — | — | — | $— | |||||
Forfeited or canceled | (193,472 | ) | — | (193,472 | ) | $11.92 | |||
Options outstanding at March 31, 2017 | 2,654,030 | — | 2,654,030 | $10.32 | 2.88 | $— | |||
Options vested at March 31, 2017 or expected to vest | 2,654,030 | $10.32 | 2.71 | $— | |||||
Options exercisable at March 31, 2017 | 2,588,219 | $10.39 | 2.84 | $— |
Non-Vested Restricted Stock Units | |||||||||
Time-Based Shares | Performance-Based Shares | Total Shares | Weighted- Average Grant-Date Fair Value | Weighted- Average Remaining Contractual Term (years) | Aggregate Intrinsic Value (in thousands) | ||||
Non-vested at January 1, 2017 | 1,513,098 | 642,683 | 2,155,781 | $6.85 | |||||
Granted | 688,453 | — | 688,453 | $5.10 | |||||
Vested | (211,185 | ) | — | (211,185 | ) | $8.47 | |||
Forfeited | (20,164 | ) | — | (20,164 | ) | $6.42 | |||
Non-vested at March 31, 2017 | 1,970,202 | 642,683 | 2,612,885 | $5.84 | 1.27 | $12,150 | |||
Expected to vest | 1,970,202 | $5.95 | 1.27 | $9,161 |
Three Months Ended March 31, | |||||||
2017 | 2016 | ||||||
Cost of products revenues | $ | 15 | $ | 30 | |||
Cost of services revenues | 49 | 149 | |||||
Research and development expenses | 88 | 85 | |||||
Marketing and selling expenses | 356 | 441 | |||||
General and administrative expenses | 903 | 1,382 | |||||
$ | 1,411 | $ | 2,087 |
ITEM 2. | 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. |
Three Months Ended March 31, | |||||
2017 | 2016 | ||||
Net revenues: | |||||
Product | 49.0 | % | 58.9 | % | |
Services | 51.0 | % | 41.1 | % | |
Total net revenues | 100.0 | % | 100.0 | % | |
Cost of revenues | 38.9 | % | 30.3 | % | |
Gross margin | 61.1 | % | 69.7 | % | |
Operating expenses: | |||||
Research and development | 18.1 | % | 14.9 | % | |
Marketing and selling | 24.8 | % | 22.0 | % | |
General and administrative | 13.9 | % | 12.3 | % | |
Amortization of intangible assets | 0.3 | % | 0.6 | % | |
Restructuring costs, net | 0.9 | % | 1.9 | % | |
Total operating expenses | 58.0 | % | 51.7 | % | |
Operating income | 3.1 | % | 18.0 | % | |
Interest and other expense, net | (4.7 | )% | (2.9 | )% | |
Income before income taxes | (1.6 | )% | 15.1 | % | |
(Benefit from) provision for income taxes | 0.1 | % | 0.4 | % | |
Net income | (1.7 | )% | 14.7 | % |
Net Revenues for the Three Months Ended March 31, 2017 and 2016 | |||||||||||||
(dollars in thousands) | |||||||||||||
2017 | Change | 2016 | |||||||||||
Net Revenues | $ | % | Net Revenues | ||||||||||
Video products and solutions | $ | 28,821 | $ | (5,748 | ) | (16.6)% | $ | 34,569 | |||||
Audio products and solutions | 22,185 | (27,755 | ) | (55.6)% | 49,940 | ||||||||
Products and solutions | 51,006 | (33,503 | ) | (39.6)% | 84,509 | ||||||||
Services | 53,101 | (5,937 | ) | (10.1)% | 59,038 | ||||||||
Total net revenues | $ | 104,107 | $ | (39,440 | ) | (27.5)% | $ | 143,547 |
Three Months Ended March 31, | |||
2017 | 2016 | ||
United States | 35% | 38% | |
Other Americas | 7% | 8% | |
Europe, Middle East and Africa | 40% | 39% | |
Asia-Pacific | 18% | 15% |
• | 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 and Gross Profit for the Three Months Ended March 31, 2017 and 2016 | |||||||||||||
(dollars in thousands) | |||||||||||||
2017 | Change | 2016 | |||||||||||
Costs | $ | % | Costs | ||||||||||
Products | $ | 24,504 | $ | (2,620 | ) | (9.7)% | $ | 27,124 | |||||
Services | 14,094 | (315 | ) | (2.2)% | 14,409 | ||||||||
Amortization of intangible assets | 1,950 | — | —% | 1,950 | |||||||||
Total cost of revenues | $ | 40,548 | $ | (2,935 | ) | (6.7)% | $ | 43,483 | |||||
Gross profit | $ | 63,559 | $ | (36,505 | ) | (36.5)% | $ | 100,064 |
Gross Margin % for the Three Months Ended March 31, 2017 and 2016 | |||||
2017 Gross Margin % | Change in Gross Margin % | 2016 Gross Margin % | |||
Products | 52.0% | (15.9)% | 67.9% | ||
Services | 73.5% | (2.1)% | 75.6% | ||
Total | 61.1% | (8.6)% | 69.7% |
Operating Expenses and Operating Income for the Three Months Ended March 31, 2017 and 2016 | |||||||||||||
(dollars in thousands) | |||||||||||||
2017 | Change | 2016 | |||||||||||
Expenses | $ | % | Expenses | ||||||||||
Research and development | $ | 18,888 | $ | (2,517 | ) | (11.8)% | $ | 21,405 | |||||
Marketing and selling | 25,811 | (5,808 | ) | (18.4)% | 31,619 | ||||||||
General and administrative | 14,431 | (3,288 | ) | (18.6)% | 17,719 | ||||||||
Amortization of intangible assets | 363 | (423 | ) | (53.8)% | 786 | ||||||||
Restructuring costs, net | 983 | (1,794 | ) | (64.6)% | 2,777 | ||||||||
Total operating expenses | $ | 60,476 | $ | (13,830 | ) | (18.6)% | $ | 74,306 | |||||
Operating income | $ | 3,083 | $ | (22,675 | ) | (88.0)% | $ | 25,758 |
Change in R&D Expenses for the Three Months Ended March 31, 2017 and 2016 | ||||||
(dollars in thousands) | ||||||
2017 Decrease From 2016 | ||||||
$ | % | |||||
Personnel-related | $ | (1,448 | ) | (12.0 | )% | |
Consulting and outside services | (719 | ) | (17.8 | )% | ||
Facilities and information technology | (223 | ) | (5.5 | )% | ||
Other | (127 | ) | (9.9 | )% | ||
Total research and development expenses decrease | $ | (2,517 | ) | (11.8 | )% |
Change in Marketing and Selling Expenses for the Three Months Ended March 31, 2017 and 2016 | ||||||
(dollars in thousands) | ||||||
2017 Decrease From 2016 | ||||||
$ | % | |||||
Personnel-related | $ | (3,587 | ) | (17.2 | )% | |
Consulting and outside services | (1,340 | ) | (55.6 | )% | ||
Bad debt | (429 | ) | (134.3 | )% | ||
Foreign exchange losses | (344 | ) | (19.6 | )% | ||
Other | (108 | ) | (1.7 | )% | ||
Total marketing and selling expenses decrease | $ | (5,808 | ) | (18.4 | )% |
Change in General and Administrative Expenses for the Three Months Ended March 31, 2017 and 2016 | ||||||
(dollars in thousands) | ||||||
2017 Decrease From 2016 | ||||||
$ | % | |||||
Consulting and outside services | $ | (1,810 | ) | (28.5 | )% | |
Personnel-related | (1,009 | ) | (14.5 | )% | ||
Acquisition and related integration | (262 | ) | (40.7 | )% | ||
Other | (207 | ) | (5.5 | )% | ||
Total general and administrative expenses decrease | $ | (3,288 | ) | (18.6 | )% |
Provision for Income Taxes for the Three Months Ended March 31, 2017 and 2016 | |||||||||||||
(dollars in thousands) | |||||||||||||
2017 | Change | 2016 | |||||||||||
Provision | $ | % | Provision | ||||||||||
Provision for income taxes | $ | 152 | $ | (483 | ) | (76.1)% | $ | 635 |
Three Months Ended March 31, | |||||||
2017 | 2016 | ||||||
Net cash provided by (used in) operating activities | $ | 3,534 | $ | (11,209 | ) | ||
Net cash used in investing activities | (36 | ) | (9,070 | ) | |||
Net cash (used in) provided by financing activities | (1,620 | ) | 89,774 | ||||
Effect of foreign currency exchange rates on cash and cash equivalents | 188 | 433 | |||||
Net increase in cash and cash equivalents | $ | 2,066 | $ | 69,928 |
ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK |
ITEM 4. | CONTROLS AND PROCEDURES |
ITEM 1. | LEGAL PROCEEDINGS |
ITEM 1A. | RISK FACTORS |
ITEM 6. | EXHIBITS |
AVID TECHNOLOGY, INC. | ||||
(Registrant) | ||||
Date: | May 10, 2017 | By: | /s/ Brian E. Agle | |
Name: | Brian E. Agle | |||
Title: | Senior Vice President and Chief Financial Officer |
Incorporated by Reference | ||||||||||
Exhibit No. | Description | Filed with this Form 10-Q | Form or Schedule | SEC Filing Date | SEC File Number | |||||
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 | ||||||||
*101.INS | XBRL Instance Document | X | ||||||||
*101.SCH | XBRL Taxonomy Extension Schema Document | X | ||||||||
*101.CAL | XBRL Taxonomy Calculation Linkbase Document | X | ||||||||
*101.DEF | XBRL Taxonomy Definition Linkbase Document | X | ||||||||
*101.LAB | XBRL Taxonomy Label Linkbase Document | X | ||||||||
*101.PRE | XBRL Taxonomy Presentation Linkbase Document | X |
* | 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. |
1. | I have reviewed this Quarterly Report on Form 10-Q 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: | May 10, 2017 | /s/ Louis Hernandez, Jr. | |||
Louis Hernandez, Jr. | |||||
Chairman and Chief Executive Officer (Principal Executive Officer) |
1. | I have reviewed this Quarterly Report on Form 10-Q 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: | May 10, 2017 | /s/ Brian E. Agle | |||
Brian E. Agle | |||||
Senior Vice President and Chief Financial Officer (Principal Financial Officer) |
Date: | May 10, 2017 | /s/ Louis Hernandez, Jr. | ||
Louis Hernandez, Jr. | ||||
Chairman and Chief Executive Officer (Principal Executive Officer) |
Date: | May 10, 2017 | /s/ Brian E. Agle | ||
Brian E. Agle | ||||
Senior Vice President and Chief Financial Officer (Principal Financial Officer) |
Document And Entity Information - USD ($) |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2017 |
May 05, 2017 |
Jun. 30, 2016 |
|
Document and Entity Information [Abstract] | |||
Entity Registrant Name | Avid Technology, Inc. | ||
Entity Central Index Key | 0000896841 | ||
Current Fiscal Year End Date | --12-31 | ||
Entity Filer Category | Accelerated Filer | ||
Document Type | 10-Q | ||
Document Period End Date | Mar. 31, 2017 | ||
Document Fiscal Year Focus | 2017 | ||
Document Fiscal Period Focus | Q1 | ||
Amendment Flag | false | ||
Entity Well-known Seasoned Issuer | No | ||
Entity Voluntary Filers | No | ||
Entity Current Reporting Status | Yes | ||
Entity Common Stock, Shares Outstanding | 40,873,485 | ||
Entity Public Float | $ 222,066,526 |
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2017 |
Mar. 31, 2016 |
|
Net income | $ (1,915) | $ 20,940 |
Other comprehensive income: | ||
Foreign currency translation adjustments | 1,850 | 3,245 |
Comprehensive income | $ (65) | $ 24,185 |
CONSOLIDATED BALANCE SHEETS (PARENTHETICAL) - USD ($) $ in Thousands |
Mar. 31, 2017 |
Dec. 31, 2016 |
---|---|---|
Allowance for doubtful accounts | $ 8,886 | $ 8,618 |
FINANCIAL INFORMATION (Notes) |
3 Months Ended | ||||||||||||||||
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Mar. 31, 2017 | |||||||||||||||||
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||||||||||||
FINANCIAL INFORMATION | FINANCIAL INFORMATION The accompanying condensed consolidated financial statements include the accounts of Avid Technology, Inc. and its wholly owned subsidiaries (collectively, “Avid” or the “Company”). These financial statements are unaudited. However, in the opinion of management, the condensed consolidated financial statements reflect all normal and recurring adjustments necessary for their fair statement. Interim results are not necessarily indicative of results expected for any other interim period or a full year. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions for Form 10-Q and, therefore, do not include all information and footnotes necessary for a complete presentation of operations, comprehensive (loss) income, financial position and cash flows of the Company in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The accompanying condensed consolidated balance sheet as of December 31, 2016 was derived from the Company’s audited consolidated financial statements and does not include all disclosures required by U.S. GAAP for annual financial statements. The Company filed audited consolidated financial statements as of and for the year ended December 31, 2016 in its Annual Report on Form 10-K for the year ended December 31, 2016, which included all information and footnotes necessary for such presentation. The financial statements contained in this Form 10-Q should be read in conjunction with the audited consolidated financial statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016. The Company’s preparation of condensed consolidated financial statements in conformity with U.S. GAAP 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 condensed consolidated financial statements and the reported amounts of revenues and expenses during the reported periods. Actual results could differ from the Company’s estimates. The Company has generally funded operations in recent years through the use of existing cash balances, supplemented from time to time with the proceeds of long-term debt and borrowings under its credit facilities. The Company’s principal sources of liquidity include cash and cash equivalents totaling $47.0 million as of March 31, 2017. In February 2016, the Company committed to a cost efficiency program that encompasses a series of measures intended to allow the Company to more efficiently operate in a leaner, and more directed cost structure. These measures include reductions in the Company’s workforce, consolidation of facilities, transfers of certain business processes to lower cost regions and reductions in other third-party service costs. The Company anticipates that the cost efficiency program will be substantially complete by the end of the second quarter of 2017. In connection with the cost efficiency program, on February 26, 2016, the Company entered into a Financing Agreement (the “Financing Agreement”) with the lenders party thereto (the “Lenders”). Pursuant to the Financing Agreement, the Company entered into a term loan in the aggregate principal amount of $100 million. The Financing Agreement also provides the Company with the ability to draw up to a maximum of $5 million in revolving credit. All outstanding loans under the Financing Agreement will become due and payable in February 2021, or in May 2020 if the $125 million in outstanding principal of 2.00% convertible senior notes due June 15, 2020 (the “Notes”) has not been repaid or refinanced by such time. 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. On March 14, 2017 (the “Effective Date”), the Company entered into an amendment (the “Amendment”) to the Financing Agreement, with the lenders party thereto. The Amendment modified the covenant requiring the Company to maintain a Leverage Ratio (defined to mean the ratio of (a) total funded indebtedness to (b) consolidated EBITDA) such that following the Effective Date, the Company is required to keep a Leverage Ratio of no greater than 3.50:1.00 for the four quarters ending March 31, 2017, 4.20:1.00 for the four quarters ending June 30, 2017, 4.75:1.00 for the four quarters ending September 30, 2017, 4.80:1.00 for the four quarters ending December 31, 2017, 4:40:1 for each of the four quarters ending March 31, 2018 through March 31, 2019, respectively, and thereafter declining over time from 3.50:1.00 to 2.50:1.00. Following the Effective Date, interest accrues on outstanding borrowings under the credit facility and the term loan (each as defined in the Financing Agreement) at a rate of either the LIBOR Rate (as defined in the Financing Agreement) plus 7.25% or a Reference Rate (as defined in the Financing Agreement) plus 6.25%, at the option of the Company. As of March 31, 2017 the Company was in compliance with the Financing Agreement covenants. The Company’s ability to satisfy the Leverage Ratio covenant in the future is dependent on its ability to increase bookings and billings above levels experienced over the last 12 months. In recent quarters, the Company has experienced volatility in bookings and billings resulting from, among other things, (i) its transition towards subscription and recurring revenue streams and the resulting decline in traditional upfront product sales, (ii) volatility in currency rates and in particular the strengthening of the US dollar against the Euro, (iii) significant changes and trends in the media industry and the impact they have had on the Company’s customers and (iv) the impact of new and anticipated product launches and features. In addition to the impact of new bookings and billings, GAAP revenues recognized as the result of the existence of Implied Maintenance Release PCS (as defined below) will be significantly lower in the remainder of 2017, as compared to 2016 periods, which will have an adverse impact on the Company’s Leverage Ratio. In the event bookings and billings in future quarters are lower than the Company currently anticipates, the Company may be forced to take remedial actions which could include, among other things (and where allowed by the Lenders), (i) further cost reductions, (ii) seeking replacement financing, (iii) raising funds through the issuance of additional equity or (iv) disposing of certain assets or businesses. Such remedial actions, which may not be available on favorable terms or at all, could have a material adverse impact on the Company’s business. If the Company is not in compliance with the Leverage Ratio and is unable to obtain an amendment or waiver, such noncompliance may result in an event of default under the Financing Agreement, which could permit acceleration of the outstanding indebtedness under the Financing Agreement and require the Company to repay such indebtedness before the scheduled due date. If an event of default were to occur, the Company might not have sufficient funds available to make the payments required. If the Company is unable to repay amounts owed, the lenders may be entitled to foreclose on and sell substantially all of the Company’s assets, which secure its borrowings under the Financing Agreement. On January 26, 2017, the Company entered into a securities purchase agreement, or the Securities Purchase Agreement, with Beijing Jetsen Technology Co., Ltd. (“Jetsen”), pursuant to which it agreed to sell to Jetsen shares of Avid common stock in an amount equal to between 5.0% and 9.9% of Avid outstanding common stock on a fully diluted basis. The purchase price for the shares is $18.2 million and will be payable in cash. The closing of the sale is subject to closing conditions, including China regulatory approvals. The Company expects the closing in the second quarter of 2017. The exact number of shares to be issued and sold at closing will be determined by reference to the trading price of Avid common stock before closing. At the same time, the Company also entered into an Exclusive Distributor Agreement with Jetsen, pursuant to which Jetsen will become the exclusive distributor for Avid products and services in the Greater China region. The Distributor Agreement has a five-year term and Jetsen is required to make at least $75.8 million of aggregate purchases under the agreement over the first three years. The Company’s cash requirements vary depending on factors such as the growth of the business, changes in working capital, capital expenditures, and obligations under the cost efficiency program. Management expects to operate the business and execute its strategic initiatives principally with funds generated from operations, remaining net proceeds from the term loan borrowings under the Financing Agreement, and draw up to a maximum of $5.0 million under the Financing Agreement’s revolving credit facility. 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 12 months as well as for the foreseeable future. Subsequent Events The Company evaluated subsequent events through the date of issuance of these financial statements and no subsequent events required recognition or disclosure in these financial statements. Significant Accounting Policies - 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, 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 many of its products, including Media Composer, Pro Tools and Sibelius product lines. In the third quarter and fourth quarter of 2015, respectively, the Company concluded that Implied Maintenance Release PCS for its Media Composer and Sibelius product lines had ceased. In the first quarter of 2016, in connection with the release of Cloud Collaboration in Pro Tools version 12.5, which was an undelivered feature that had prevented the Company from recognizing any revenue related to new Pro Tools 12 software sales as it represented a specified upgrade right for which vendor specific objective evidence (“VSOE”) of fair value was not available, the Company concluded that Implied Maintenance Release PCS for Pro Tools 12 product lines had also ended. As a result of the conclusion that Implied Maintenance Release PCS on Pro Tools 12 has ended, revenue and net income in the first quarter of 2016 increased approximately $11.1 million, reflecting the recognition of orders received after the launch of Pro Tools 12 that would have qualified for earlier recognition using the residual method of accounting. In addition, the elimination of Implied Maintenance Release PCS also resulted in the accelerated recognition of maintenance and product revenues that were previously being recognized on a ratable basis over a much longer expected period of Implied Maintenance Release PCS rather than the contractual maintenance period. The reduction in the estimated amortization period of transactions being recognized on a ratable basis resulted in an additional $6.5 million of revenue during the three months ended March 31, 2016. 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 some of the Company’s professional services, training and support offerings. The Company’s policy for establishing VSOE of fair value consists of evaluating standalone sales 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 Accounting Standards Update (“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 (“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. The timing of revenue recognition of customer arrangements follows a number of different accounting models determined by the characteristics of the arrangement, and that timing can vary significantly from the timing of related cash payments due from customers. One significant factor affecting the timing of revenue recognition is the determination of whether each deliverable in the arrangement is considered to be a software deliverable or a non-software deliverable. For transactions occurring after January 1, 2011, the Company’s revenue recognition policies have generally resulted in the recognition of approximately 70% of billings as revenue in the year of billing, and prior to January 1, 2011, the previously applied revenue recognition policies resulted in the recognition of approximately 30% of billings as revenue in the year of billing. The Company expects this trend to continue in future periods. 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 twelve 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 one to eight 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 some 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 some 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. Recently Adopted Accounting Pronouncement In January 2017, the FASB issued Accounting Standards Update (ASU) No. 2017-04, Simplifying the Test for Goodwill Impairment. The guidance simplifies the accounting for goodwill impairment by removing Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation. Goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. The revised guidance will be applied prospectively, and is effective for calendar year-end SEC filers in 2020. Early adoption is permitted for annual and interim goodwill impairment testing dates after January 1, 2017. The Company adopted the revised guidance during the first quarter of 2017. The adoption of ASU 2017-04 had no immediate impact on the Company’s condensed consolidated financial statements upon adoption, however, it could impact the calculation of goodwill impairments in future periods. Recent Accounting Pronouncements to be Adopted In May, 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606). ASU No. 2014-09 is the final updated standard on revenue recognition. The standard supersedes the 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. Subsequently, the FASB has issued the following standards related to ASU No. 2014-09: ASU No. 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations; ASU No. 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing; and ASU No. 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients. The Company must adopt ASU No. 2016-08, ASU No. 2016-10 and ASU No. 2016-12 with ASU No. 2014-09 (collectively, the “new revenue standards”). Entities have the option of using either a full retrospective or a modified approach to adopt the new revenue standards. The Company expects to elect the modified transition method and, while the Company is still in the early stages of evaluating the impact of this new accounting standard, it expects the impact will be significant. The adoption will result in a significant cumulative reduction in deferred revenue as of January 1, 2018 because the Company will no longer require VSOE of fair value to recognize software deliverables with Implied Maintenance Release PCS upon delivery. Upon adoption of ASC 606, the Company expects to recognize a greater proportion of revenue upon delivery of its products, whereas some of the Company’s current product sales are initially recorded in deferred revenue and recognized over a long period of time. Accordingly, the Company’s operating results may become more volatile as a result of the adoption. On February 25, 2016, the FASB issued ASU No. 2016-02, Leases (Topic (842). The guidance requires an entity 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, as well as the timing of its adoption of the standard. In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flow (Topic 230). The guidance reduces diversity in how certain cash receipts and cash payments are presented and classified in the Statements of Cash Flows. Certain of ASU No. 2016-15 requirements are as follows: 1) cash payments for debt prepayment or debt extinguishment costs should be classified as cash outflows for financing activities, 2) contingent consideration payments made soon after a business combination should be classified as cash outflows for investing activities and cash payment made thereafter should be classified as cash outflows for financing up to the amount of the contingent consideration liability recognized at the acquisition date with any excess classified as operating activities, 3) cash proceeds from the settlement of insurance claims should be classified on the basis of the nature of the loss, 4) cash proceeds from the settlement of Corporate-Owned Life Insurance (COLI) Policies should be classified as cash inflows from investing activities and cash payments for premiums on COLI policies may be classified as cash outflows for investing activities, operating activities, or a combination of investing and operating activities, and 5) cash paid to a tax authority by an employer when withholding shares from an employee's award for tax-withholding purposes should be classified as cash outflows for financing activities. The new guidance becomes effective for the Company on January 1, 2018, and early adoption is permitted upon issuance. The Company is currently evaluating the potential impact of adopting this standard on its financial statements, as well as the timing of its adoption of the standard. In October 2016, the FASB issued ASU No. 2016-16, Income Taxes (Topic 740). The guidance requires companies to recognize the income tax effects of intercompany sales and transfers of assets, other than inventory, in the income statement as income tax expense (or benefit) in the period in which the transfer occurs. The new guidance becomes effective for the Company on January 1, 2018, and early adoption is permitted upon issuance. The Company is currently evaluating the impact of the adoption of ASU No. 2016-16 on its financial statements, as well as timing of its adoption of the standard. In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash. The guidance requires companies to show the changes in the total of cash, cash equivalents, restricted cash and restricted cash equivalents in the statement of cash flows. As a result, companies will no longer present transfers between cash and cash equivalents and restricted cash and restricted cash equivalents in the statement of cash flows. When cash, cash equivalents, restricted cash and restricted cash equivalents are presented in more than one line item on the balance sheet, a reconciliation of the totals in the statement of cash flows to the related captions in the balance sheet is required. The new guidance becomes effective for the Company on January 1, 2018, and early adoption is permitted upon issuance. The Company is currently evaluating the potential impact of adopting this standard on its financial statements, as well as the timing of its adoption of the standard. |
NET INCOME PER SHARE Earnings Per Share (Notes) |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||
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 share 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 and market conditions. The following table sets forth (in thousands) potential common shares that were considered anti-dilutive securities at March 31, 2017 and for the three months ended March 31, 2016.
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 (see Note 10). 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 10, 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 of the Company’s common stock but the Company’s stock price was less than the conversion price as of March 31, 2017, and, therefore, the Notes are excluded from Diluted EPS. The Capped Call is not reflected in diluted net income per share as it will always be anti-dilutive. |
FAIR VALUE MEASUREMENTS (Notes) |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
FAIR VALUE MEASUREMENTS | FAIR VALUE MEASUREMENTS Assets Measured at Fair Value on a Recurring Basis The Company measures deferred compensation investments on a recurring basis. As of March 31, 2017 and December 31, 2016, the Company’s deferred compensation investments 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 money market and mutual funds. Assets valued based on other observable inputs and classified as Level 2 are insurance contracts. The following tables summarize the Company’s deferred compensation investments measured at fair value on a recurring basis (in thousands):
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. As of March 31, 2017, the net carrying amount of the Notes was $103.0 million, and the fair value of the Notes was approximately $88.7 million based on open market trading activity, which constitutes a Level 1 input in the fair value hierarchy. |
INVENTORIES (Notes) |
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Inventory Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
INVENTORIES | INVENTORIES Inventories consisted of the following (in thousands):
As of March 31, 2017 and December 31, 2016, finished goods inventory included $9.7 million and $8.6 million, respectively, associated with products shipped to customers and deferred labor costs for arrangements where revenue recognition had not yet commenced. |
INTANGIBLE ASSETS AND GOODWILL Intangible Assets (Notes) |
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INTANGIBLE ASSETS AND GOODWILL | INTANGIBLE ASSETS AND GOODWILL 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 (in thousands):
Amortization expense related to all intangible assets in the aggregate was $2.3 million and $2.7 million, respectively, for the three months ended March 31, 2017 and 2016. The Company expects amortization of acquired intangible assets to be $6.9 million for the remainder of 2017, $9.3 million in 2018, and $4.4 million in 2019. The acquisition of Orad resulted in goodwill of $32.6 million in 2015. |
OTHER LONG-TERM LIABILITIES Long-Term Liabilities (Notes) |
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OTHER LONG-TERM LIABILITIES | OTHER LONG-TERM LIABILITIES Other long-term liabilities consisted of the following (in thousands):
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CONTINGENCIES (Notes) |
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Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
CONTINGENCIES | CONTINGENCIES 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. In November 2016, a purported securities class action lawsuit was filed in the U.S. District Court for the District of Massachusetts (Mohanty v. Avid Technology, Inc. et al., No. 16-cv-12336) against the Company and certain of its executive officers seeking unspecified damages and other relief on behalf of a purported class of purchasers of the Company’s common stock between August 4, 2016 and November 9, 2016, inclusive. The complaint purported to state a claim for violation of federal securities laws as a result of alleged violations of Sections 10(b) and 20(a) of the Exchange Act and Rule 10b-5 promulgated thereunder. The complaint’s allegations relate generally to the Company’s disclosure surrounding the level of implementation of the Company’s Avid NEXIS solution product offerings. On February 7, 2017, the Court appointed a lead plaintiff and counsel in the matter. The matter is not yet scheduled for trial. 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 March 31, 2017 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 has letters of credit that are used as security deposits in connection with the Company’s leased Burlington, Massachusetts office space. In the event of default on the underlying leases, the landlords would, at March 31, 2017, be eligible to draw against the letters of credit to a maximum of $1.3 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 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 letters of credit in connection with security deposits for other facility leases totaling $1.0 million in the aggregate, as well as letters of credit totaling $1.5 million that otherwise support its ongoing operations. These letters of credit have various terms and expire during 2017 and beyond, while some of the letters of credit may automatically renew based on the terms of the underlying agreements. 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 three months ended March 31, 2017 and 2016 (in thousands):
The warranty accrual is included in the caption “accrued expenses and other current liabilities” in the Company’s condensed consolidated balance sheet. |
RESTRUCTURING COSTS AND ACCRUALS (Notes) |
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RESTRUCTURING COSTS AND ACCRUALS | RESTRUCTURING COSTS AND ACCRUALS 2016 Restructuring Plan In February 2016, the Company committed to a restructuring plan that encompasses 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, consolidation of facilities, transfers of certain business processes to lower cost regions, and reductions in other third-party services costs. The Company anticipates that the cost efficiency program will be substantially complete by the end of the second quarter of 2017. During the quarter ended March 31, 2016, the Company recorded restructuring costs of $2.8 million, representing the elimination of an additional 63 positions worldwide. During the quarter ended March 31, 2017, the Company recorded restructuring charges of $1.3 million, related to severance costs for the elimination of an additional 44 positions worldwide, and recoveries of $0.5 million related to severance estimate adjustments, and $0.2 million for the partial closure of Pinewood Studios facilities in Iver Heath, United Kingdom. Prior Years’ Restructuring Plans There was an accrual balance of $1.2 million as of March 31, 2017, which was related to the closure of part of the Company’s Mountain View, California, and Dublin, Ireland facilities under restructuring plans that were made in 2012 and 2008, respectively. No further actions are anticipated under those plans. Restructuring Summary The following table sets forth the activity in the restructuring accruals for the three months ended March 31, 2017 (in thousands):
The employee-related accruals at March 31, 2017 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/other-related accruals at March 31, 2017 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 December 2021 unless the Company is able to negotiate earlier terminations. Of the total facilities/other-related balance, $1.7 million is included in the caption “accrued expenses and other current liabilities” and $1.0 million is included in the caption “other long-term liabilities” in the Company’s condensed consolidated balance sheet as of March 31, 2017. |
PRODUCT AND GEOGRAPHIC INFORMATION (Notes) |
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PRODUCT AND GEOGRAPHIC INFORMATION | PRODUCT AND GEOGRAPHIC INFORMATION The Company, through the evaluation of the discrete financial information that is regularly reviewed by the chief operating decision makers (the Company’s chief executive officer and chief financial officer), has determined that the Company has one reportable segment. The following table is a summary of the Company’s revenues by type for the three months ended March 31, 2017 and 2016 (in thousands):
The following table sets forth the Company’s revenues by geographic region for the three months ended March 31, 2017 and 2016 (in thousands):
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LONG TERM DEBT AND CREDIT AGREEMENT Debt Disclosure (Notes) |
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LONG TERM DEBT AND CREDIT AGREEMENT | LONG TERM DEBT AND CREDIT AGREEMENT Long term debt consisted of the following (in thousands):
2.00% Convertible Senior Notes due 2020 On June 15, 2015, the Company issued $125.0 million aggregate principal amount of its Notes in an offering conducted in accordance with Rule 144A under the Securities Act of 1933. The Notes pay interest semi-annually on June 15 and December 15 of each year 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. Total interest expense for the three months ended March 31, 2017 and 2016 was $2.1 million and $2.0 million, respectively, reflecting the coupon and accretion of the discount. Credit Facility On February 26, 2016, the Company entered into the Financing Agreement with 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 $100.0 million (the “Term Loan”) and (b) a revolving credit facility (the “Credit Facility”) of up to a maximum of $5.0 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 if the $125.0 million in outstanding principal of the Notes has not been repaid or refinanced by such time. The Company granted a security interest on substantially all of its assets to secure the obligations under the Credit Facility and the Term Loan. The Company borrowed the full amount of the Term Loan, or $100.0 million, as of the closing date of the Financing Agreement, and there were no amounts outstanding under the Credit Facility as of March 31, 2017. 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, which commenced in June 2016. The Term Loan also requires the Company to use 50% of excess cash flow, as defined in the Financing Agreement, to repay outstanding principal of the loans under the Financing Agreement. 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. On March 14, 2017 (the “Effective Date”), the Company entered into an amendment (the “Amendment”) to the Financing Agreement, with the lenders party thereto. The Amendment modified the covenant requiring the Company to maintain a Leverage Ratio (defined to mean the ratio of (a) total funded indebtedness to (b) consolidated EBITDA) such that following the Effective Date, the Company is required to keep a Leverage Ratio of no greater than 3.50:1.00 for the four quarters ending March 31, 2017, 4.20:1.00 for the four quarters ending June 30, 2017, 4.75:1.00 for the four quarters ending September 30, 2017, 4.80:1.00 for the four quarters ending December 31, 2017, 4:40:1 for each of the four quarters ending March 31, 2018 through March 31, 2019, respectively, and thereafter declining over time from 3.50:1.00 to 2.50:1.00. Following the Effective Date, interest accrues on outstanding borrowings under the credit facility and the term loan (each as defined in the Financing Agreement) at a rate of either the LIBOR Rate (as defined in the Financing Agreement) plus 7.25% or a Reference Rate (as defined in the Financing Agreement) plus 6.25%, at the option of the Company. The Company recorded $1.9 million and $0.7 million of interest expense on the Term Loan for the three months ended March 31, 2017 and 2016, respectively. As of March 31, 2017 the Company was in compliance with the Financing Agreement covenants. |
STOCKHOLDERS' EQUITY Share-Based Compensation (Notes) |
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STOCKHOLDERS' EQUITY | STOCKHOLDERS’ EQUITY Stock-Based Compensation Information with respect to option shares granted under all the Company’s stock incentive plans for the three months ended March 31, 2017 was as follows:
Information with respect to the Company’s non-vested restricted stock units for the three months ended March 31, 2017 was as follows:
Stock-based compensation was included in the following captions in the Company’s condensed consolidated statements of operations for the three months ended March 31, 2017 and 2016 (in thousands):
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FINANCIAL INFORMATION Significant Accounting Policies (Policies) |
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Financial Information [Abstract] | |||||||||||||||||
Revenue Recognition, Deferred Revenue [Policy Text Block] | Significant Accounting Policies - 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, 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 many of its products, including Media Composer, Pro Tools and Sibelius product lines. In the third quarter and fourth quarter of 2015, respectively, the Company concluded that Implied Maintenance Release PCS for its Media Composer and Sibelius product lines had ceased. In the first quarter of 2016, in connection with the release of Cloud Collaboration in Pro Tools version 12.5, which was an undelivered feature that had prevented the Company from recognizing any revenue related to new Pro Tools 12 software sales as it represented a specified upgrade right for which vendor specific objective evidence (“VSOE”) of fair value was not available, the Company concluded that Implied Maintenance Release PCS for Pro Tools 12 product lines had also ended. As a result of the conclusion that Implied Maintenance Release PCS on Pro Tools 12 has ended, revenue and net income in the first quarter of 2016 increased approximately $11.1 million, reflecting the recognition of orders received after the launch of Pro Tools 12 that would have qualified for earlier recognition using the residual method of accounting. In addition, the elimination of Implied Maintenance Release PCS also resulted in the accelerated recognition of maintenance and product revenues that were previously being recognized on a ratable basis over a much longer expected period of Implied Maintenance Release PCS rather than the contractual maintenance period. The reduction in the estimated amortization period of transactions being recognized on a ratable basis resulted in an additional $6.5 million of revenue during the three months ended March 31, 2016. 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 some of the Company’s professional services, training and support offerings. The Company’s policy for establishing VSOE of fair value consists of evaluating standalone sales 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 Accounting Standards Update (“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 (“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. The timing of revenue recognition of customer arrangements follows a number of different accounting models determined by the characteristics of the arrangement, and that timing can vary significantly from the timing of related cash payments due from customers. One significant factor affecting the timing of revenue recognition is the determination of whether each deliverable in the arrangement is considered to be a software deliverable or a non-software deliverable. For transactions occurring after January 1, 2011, the Company’s revenue recognition policies have generally resulted in the recognition of approximately 70% of billings as revenue in the year of billing, and prior to January 1, 2011, the previously applied revenue recognition policies resulted in the recognition of approximately 30% of billings as revenue in the year of billing. The Company expects this trend to continue in future periods. 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 twelve 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 one to eight 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 some 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 some 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. |
FINANCIAL INFORMATION Recent Accounting Pronouncements To Be Adopted (Policies) |
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New Accounting Pronouncement, Early Adoption [Table Text Block] | Recently Adopted Accounting Pronouncement In January 2017, the FASB issued Accounting Standards Update (ASU) No. 2017-04, Simplifying the Test for Goodwill Impairment. The guidance simplifies the accounting for goodwill impairment by removing Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation. Goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. The revised guidance will be applied prospectively, and is effective for calendar year-end SEC filers in 2020. Early adoption is permitted for annual and interim goodwill impairment testing dates after January 1, 2017. The Company adopted the revised guidance during the first quarter of 2017. The adoption of ASU 2017-04 had no immediate impact on the Company’s condensed consolidated financial statements upon adoption, however, it could impact the calculation of goodwill impairments in future periods. |
New Accounting Pronouncements, Policy [Policy Text Block] | Recent Accounting Pronouncements to be Adopted In May, 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606). ASU No. 2014-09 is the final updated standard on revenue recognition. The standard supersedes the 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. Subsequently, the FASB has issued the following standards related to ASU No. 2014-09: ASU No. 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations; ASU No. 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing; and ASU No. 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients. The Company must adopt ASU No. 2016-08, ASU No. 2016-10 and ASU No. 2016-12 with ASU No. 2014-09 (collectively, the “new revenue standards”). Entities have the option of using either a full retrospective or a modified approach to adopt the new revenue standards. The Company expects to elect the modified transition method and, while the Company is still in the early stages of evaluating the impact of this new accounting standard, it expects the impact will be significant. The adoption will result in a significant cumulative reduction in deferred revenue as of January 1, 2018 because the Company will no longer require VSOE of fair value to recognize software deliverables with Implied Maintenance Release PCS upon delivery. Upon adoption of ASC 606, the Company expects to recognize a greater proportion of revenue upon delivery of its products, whereas some of the Company’s current product sales are initially recorded in deferred revenue and recognized over a long period of time. Accordingly, the Company’s operating results may become more volatile as a result of the adoption. On February 25, 2016, the FASB issued ASU No. 2016-02, Leases (Topic (842). The guidance requires an entity 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, as well as the timing of its adoption of the standard. In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flow (Topic 230). The guidance reduces diversity in how certain cash receipts and cash payments are presented and classified in the Statements of Cash Flows. Certain of ASU No. 2016-15 requirements are as follows: 1) cash payments for debt prepayment or debt extinguishment costs should be classified as cash outflows for financing activities, 2) contingent consideration payments made soon after a business combination should be classified as cash outflows for investing activities and cash payment made thereafter should be classified as cash outflows for financing up to the amount of the contingent consideration liability recognized at the acquisition date with any excess classified as operating activities, 3) cash proceeds from the settlement of insurance claims should be classified on the basis of the nature of the loss, 4) cash proceeds from the settlement of Corporate-Owned Life Insurance (COLI) Policies should be classified as cash inflows from investing activities and cash payments for premiums on COLI policies may be classified as cash outflows for investing activities, operating activities, or a combination of investing and operating activities, and 5) cash paid to a tax authority by an employer when withholding shares from an employee's award for tax-withholding purposes should be classified as cash outflows for financing activities. The new guidance becomes effective for the Company on January 1, 2018, and early adoption is permitted upon issuance. The Company is currently evaluating the potential impact of adopting this standard on its financial statements, as well as the timing of its adoption of the standard. In October 2016, the FASB issued ASU No. 2016-16, Income Taxes (Topic 740). The guidance requires companies to recognize the income tax effects of intercompany sales and transfers of assets, other than inventory, in the income statement as income tax expense (or benefit) in the period in which the transfer occurs. The new guidance becomes effective for the Company on January 1, 2018, and early adoption is permitted upon issuance. The Company is currently evaluating the impact of the adoption of ASU No. 2016-16 on its financial statements, as well as timing of its adoption of the standard. In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash. The guidance requires companies to show the changes in the total of cash, cash equivalents, restricted cash and restricted cash equivalents in the statement of cash flows. As a result, companies will no longer present transfers between cash and cash equivalents and restricted cash and restricted cash equivalents in the statement of cash flows. When cash, cash equivalents, restricted cash and restricted cash equivalents are presented in more than one line item on the balance sheet, a reconciliation of the totals in the statement of cash flows to the related captions in the balance sheet is required. The new guidance becomes effective for the Company on January 1, 2018, and early adoption is permitted upon issuance. The Company is currently evaluating the potential impact of adopting this standard on its financial statements, as well as the timing of its adoption of the standard. |
NET INCOME PER SHARE Earnings Per Share (Tables) |
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Schedule of Antidilutive Securities Excluded From Computation of Net (Income) Loss Per Share | The following table sets forth (in thousands) potential common shares that were considered anti-dilutive securities at March 31, 2017 and for the three months ended March 31, 2016.
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FAIR VALUE MEASUREMENTS (Tables) |
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Financial assets and liabilities measured at fair value on a recurring basis | The following tables summarize the Company’s deferred compensation investments measured at fair value on a recurring basis (in thousands):
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INVENTORIES (Tables) |
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Inventories | Inventories consisted of the following (in thousands):
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INTANGIBLE ASSETS (Tables) |
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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 (in thousands):
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OTHER LONG-TERM LIABILITIES Long-Term Liabilities (Tables) |
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Long-term liabilities | Other long-term liabilities consisted of the following (in thousands):
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CONTINGENCIES (Tables) |
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Product warranty accrual activity | The following table sets forth the activity in the product warranty accrual account for the three months ended March 31, 2017 and 2016 (in thousands):
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RESTRUCTURING COSTS AND ACCRUALS (Tables) |
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Schedule of Restructuring and Related Costs | The following table sets forth the activity in the restructuring accruals for the three months ended March 31, 2017 (in thousands):
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PRODUCT AND GEOGRAPHIC INFORMATION (Tables) |
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Reconciliation of Revenue from Segments to Consolidated | The following table is a summary of the Company’s revenues by type for the three months ended March 31, 2017 and 2016 (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 by geographic region for the three months ended March 31, 2017 and 2016 (in thousands):
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LONG TERM DEBT AND CREDIT AGREEMENT Schedule of Long-Term Debt (Tables) |
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Schedule of Long-term Debt Instruments [Table Text Block] | Long term debt consisted of the following (in thousands):
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STOCKHOLDERS' EQUITY Share-Based Compensation (Tables) |
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Schedule of Share-based Compensation, Stock Options, Activity [Table Text Block] | Information with respect to option shares granted under all the Company’s stock incentive plans for the three months ended March 31, 2017 was as follows:
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Schedule of Share-based Compensation, Restricted Stock and Restricted Stock Units Activity [Table Text Block] | Information with respect to the Company’s non-vested restricted stock units for the three months ended March 31, 2017 was as follows:
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Schedule of Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Table Text Block] | Stock-based compensation was included in the following captions in the Company’s condensed consolidated statements of operations for the three months ended March 31, 2017 and 2016 (in thousands):
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FINANCIAL INFORMATION Financial Information (Details) - USD ($) |
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Long-term Debt | $ 189,302,000 | $ 188,795,000 | ||||||||
Cash and Cash Equivalents, at Carrying Value | $ 87,830,000 | $ 47,014,000 | $ 44,948,000 | $ 17,902,000 | ||||||
Beijing Jetsen Securities Purchase Agreement [Member] | ||||||||||
Minimum Percentage of Shares Outstanding Purchased | 5.00% | |||||||||
Maximum Percentage of Shares Outstanding Purchased | 9.90% | |||||||||
Proceeds from Issuance of Common Stock | $ 18,160,000 | |||||||||
Beijing Jetsen Distribution Agreement [Domain] | ||||||||||
Distribution Agreement Value | $ 75,800,000 | |||||||||
Convertible Debt [Member] | ||||||||||
Long-term Debt, Gross | $ 125,000,000 | |||||||||
Debt Instrument, Interest Rate, Stated Percentage | 2.00% | |||||||||
Cerberus Business Finance LLC [Member] | ||||||||||
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. On March 14, 2017 (the “Effective Date”), the Company entered into an amendment (the “Amendment”) to the Financing Agreement, with the lenders party thereto. The Amendment modified the covenant requiring the Company to maintain a Leverage Ratio (defined to mean the ratio of (a) total funded indebtedness to (b) consolidated EBITDA) such that following the Effective Date, the Company is required to keep a Leverage Ratio of no greater than 3.50:1.00 for the four quarters ending March 31, 2017, 4.20:1.00 for the four quarters ending June 30, 2017, 4.75:1.00 for the four quarters ending September 30, 2017, 4.80:1.00 for the four quarters ending December 31, 2017, 4:40:1 for each of the four quarters ending March 31, 2018 through March 31, 2019, respectively, and thereafter declining over time from 3.50:1.00 to 2.50:1.00. | |||||||||
Line of Credit Facility, Interest Rate Description | Following the Effective Date, interest accrues on outstanding borrowings under the credit facility and the term loan (each as defined in the Financing Agreement) at a rate of either the LIBOR Rate (as defined in the Financing Agreement) plus 7.25% or a Reference Rate (as defined in the Financing Agreement) plus 6.25%, at the option of the Company. | |||||||||
Cerberus Business Finance LLC [Member] | Line of Credit [Member] | ||||||||||
Line of Credit Facility, Maximum Borrowing Capacity | $ 5,000,000 | |||||||||
Cerberus Business Finance LLC [Member] | Long-term Debt [Member] | ||||||||||
Long-term Debt | 100,000,000 | |||||||||
Cerberus Business Finance LLC [Member] | Line of Credit [Member] | ||||||||||
Line of Credit Facility, Maximum Borrowing Capacity | $ 5,000,000 | |||||||||
Services Revenues [Member] | ||||||||||
New Accounting Pronouncement or Change in Accounting Principle, Effect of Adoption, Quantification | 11,100,000 | |||||||||
Deferred Revenue [Domain] | ||||||||||
New Accounting Pronouncement or Change in Accounting Principle, Effect of Adoption, Quantification | $ 6,500,000 | |||||||||
Accounting Standards Update No. 2009-14 [Member] | ||||||||||
New Accounting Pronouncement Adoption, Percent Revenue Recognized at Billing | 70.00% | 30.00% |
NET INCOME PER SHARE Earnings Per Share (Details) - USD ($) shares in Thousands, $ in Millions |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2017 |
Mar. 31, 2016 |
Jun. 15, 2015 |
|
Antidilutive Securities Excluded from Computation of Net Loss Per Share [Line Items] | |||
Anti-dilutive potential common shares (in thousands of shares) | 5,267 | 5,099 | |
Options | |||
Antidilutive Securities Excluded from Computation of Net Loss Per Share [Line Items] | |||
Anti-dilutive potential common shares (in thousands of shares) | 2,654 | 4,313 | |
Non-vested restricted stock units | |||
Antidilutive Securities Excluded from Computation of Net Loss Per Share [Line Items] | |||
Anti-dilutive potential common shares (in thousands of shares) | 2,613 | 786 | |
Convertible Debt [Member] | |||
Antidilutive Securities Excluded from Computation of Net Loss Per Share [Line Items] | |||
Long-term Debt, Gross | $ 125.0 | ||
Debt Instrument, Interest Rate, Stated Percentage | 2.00% |
FAIR VALUE MEASUREMENTS (Details) - USD ($) $ in Thousands |
Mar. 31, 2017 |
Dec. 31, 2016 |
---|---|---|
Liabilities: | ||
Convertible Notes, Carrying Value | $ 103,045 | $ 101,587 |
Fair Value, Measurements, Recurring [Member] | ||
Financial Assets: | ||
Deferred compensation assets | 1,948 | 2,035 |
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 1 [Member] | ||
Financial Assets: | ||
Deferred compensation assets | 438 | 493 |
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 2 [Member] | ||
Financial Assets: | ||
Deferred compensation assets | 1,510 | 1,542 |
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 3 [Member] | ||
Financial Assets: | ||
Deferred compensation assets | 0 | $ 0 |
Convertible Debt [Member] | ||
Liabilities: | ||
Convertible Notes, Fair Value Disclosure | $ 88,700 |
INVENTORIES (Details) - USD ($) $ in Thousands |
Mar. 31, 2017 |
Dec. 31, 2016 |
---|---|---|
Raw materials | $ 11,281 | $ 10,481 |
Work in process | 368 | 291 |
Finished Goods | 37,479 | 39,929 |
Total inventory | 49,128 | 50,701 |
Finished goods, consigned | $ 9,700 | $ 8,600 |
OTHER LONG-TERM LIABILITIES Long-Term Liabilities (Details) - USD ($) $ in Thousands |
Mar. 31, 2017 |
Dec. 31, 2016 |
---|---|---|
Other Liabilities Disclosure [Abstract] | ||
Long-term deferred rent | $ 5,140 | $ 5,458 |
Long-term accrued restructuring | 1,026 | 1,256 |
Long-term deferred compensation | 5,478 | 5,464 |
Total long-term liabilities | $ 11,644 | $ 12,178 |
CONTINGENCIES (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2017 |
Mar. 31, 2016 |
|
Product warranty accrual [Roll Forward] | ||
Accrual balance at beginning of year | $ 2,518 | $ 2,234 |
Accruals for product warranties | 806 | 455 |
Cost of warranty claims | (634) | (455) |
Accrual balance at end of period | 2,690 | $ 2,234 |
Standby Letters of Credit [Member] | Office Space - Burlington, Massachusetts [Member] | ||
Loss Contingencies [Line Items] | ||
Loss Contingency, Range of Possible Loss, Portion Not Accrued | 1,300 | |
Loss Contingency, Range Of Possible Loss, Portion Not Accrued, Minimum | 1,200 | |
Avid Technology Domestic [Member] | Standby Letters of Credit [Member] | ||
Operating Lease Commitments [Abstract] | ||
Letters of Credit Outstanding, Amount | 1,000 | |
Other Operating Obligations [Member] | Standby Letters of Credit [Member] | ||
Operating Lease Commitments [Abstract] | ||
Letters of Credit Outstanding, Amount | $ 1,500 |
LONG TERM DEBT AND CREDIT AGREEMENT Debt Disclosurre (Details) - USD ($) $ in Thousands |
3 Months Ended | |||||
---|---|---|---|---|---|---|
Mar. 14, 2017 |
Feb. 26, 2016 |
Mar. 31, 2017 |
Mar. 31, 2016 |
Dec. 31, 2016 |
Jun. 15, 2015 |
|
Term Loan, net of unamortized debt issuance costs of $0 at March 31, 2017 and $4,042 at December 31, 2016 | $ 91,257 | $ 92,208 | ||||
Notes, net of unamortized original issue discount and debt issuance costs of $0 at March 31, 2017 and $23,413 at December 31, 2016, respectively | 103,045 | 101,587 | ||||
Total debt | 194,302 | 193,795 | ||||
Less: current portion | 5,000 | 5,000 | ||||
Total long-term debt | 189,302 | 188,795 | ||||
Interest Expense | 4,846 | $ 4,183 | ||||
Convertible Debt [Member] | ||||||
Debt Instrument, Interest Rate, Stated Percentage | 2.00% | |||||
Interest Expense | 2,100 | 2,000 | ||||
Convertible Notes unamortized issue discount and debt issuance costs | 21,955 | 23,413 | ||||
Cerberus Business Finance LLC [Member] | ||||||
Debt Instrument, Collateral | The Company granted a security interest on substantially all of its assets to secure the obligations under the Credit Facility and the Term Loan. | |||||
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. On March 14, 2017 (the “Effective Date”), the Company entered into an amendment (the “Amendment”) to the Financing Agreement, with the lenders party thereto. The Amendment modified the covenant requiring the Company to maintain a Leverage Ratio (defined to mean the ratio of (a) total funded indebtedness to (b) consolidated EBITDA) such that following the Effective Date, the Company is required to keep a Leverage Ratio of no greater than 3.50:1.00 for the four quarters ending March 31, 2017, 4.20:1.00 for the four quarters ending June 30, 2017, 4.75:1.00 for the four quarters ending September 30, 2017, 4.80:1.00 for the four quarters ending December 31, 2017, 4:40:1 for each of the four quarters ending March 31, 2018 through March 31, 2019, respectively, and thereafter declining over time from 3.50:1.00 to 2.50:1.00. | |||||
Line of Credit Facility, Interest Rate Description | Following the Effective Date, interest accrues on outstanding borrowings under the credit facility and the term loan (each as defined in the Financing Agreement) at a rate of either the LIBOR Rate (as defined in the Financing Agreement) plus 7.25% or a Reference Rate (as defined in the Financing Agreement) plus 6.25%, at the option of the Company. | |||||
Cerberus Business Finance LLC [Member] | Long-term Debt [Member] | ||||||
Unamortized Debt Issuance Expense | 3,743 | $ 4,042 | ||||
Total long-term debt | $ 100,000 | |||||
Debt Instrument, Payment Terms | 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, which commenced in June 2016. The Term Loan also requires the Company to use 50% of excess cash flow, as defined in the Financing Agreement, to repay outstanding principal of the loans under the Financing Agreement. | |||||
Interest Expense, Long-term Debt | $ 1,900 | $ 700 | ||||
Cerberus Business Finance LLC [Member] | Line of Credit [Member] | ||||||
Line of Credit Facility, Maximum Borrowing Capacity | $ 5,000 |
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