TiVo 2004 Annual Report Download - page 62

Table of Contents
Index to Financial Statements
TIVO INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. NATURE OF OPERATIONS
TiVo Inc. (the "Company" or "TiVo") was incorporated in August 1997 as a Delaware corporation and is located in Alviso, California. On August 21,
2000, TiVo (UK) Limited, a wholly owned subsidiary of TiVo Inc., was incorporated in the United Kingdom. On October 9, 2001, the Company formed a
subsidiary, TiVo International, Inc., also a Delaware corporation. On July 16, 2004, TiVo Intl. II, Inc., a wholly owned subsidiary of TiVo Inc., was
incorporated in the Cayman Islands. TiVo is a provider of technology and services for digital video recorders, or DVRs. The Company has developed a
subscription-based television service (the "TiVo service") that improves home entertainment by providing consumers with an easy way to record, watch, and
control television. The TiVo service also offers the television industry a platform for advertisers, content delivery, and audience measurement research. The
TiVo service requires a TiVo-enabled DVR or set-top box. These may be purchased at major consumer electronics retailers throughout the United States or
through the Company's website.
The Company continues to be subject to a number of risks, including delays in product and service developments; competitive service offerings; lack of
market acceptance and uncertainty of future profitability; the dependence on third parties for manufacturing, marketing, and sales support; the intellectual
property claims against the Company; and dependence on its relationship with DIRECTV for subscription growth. The Company conducts its operations
through one reportable segment. The Company anticipates that its business will continue to be seasonal and expects to generate a significant number of its
annual new subscriptions during and immediately after the holiday shopping season.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Related Parties Relationships
Effective February 1, 2004, the Company re-evaluated the status of its related parties relationships. Previously, the Company had classified DIRECTV,
Inc. ("DIRECTV"), AOL Time Warner ("AOL"), National Broadcasting Company, Inc. ("NBC"), Discovery Communications, Inc.( "Discovery"), Philips
Business Electronics B.V. ("Philips"), Maxtor Corporation ("Maxtor"), and Sony Corporation of America ("Sony") as related parties. As of February 1, 2004,
the Company re-evaluated these relationships and concluded that Sony, Maxtor, AOL, and Philips no longer maintained a related party relationship with the
Company as these companies were not in the position to significantly influence management or operating policies.
In June 2004, the Company determined DIRECTV no longer met its definition of a related party relationship because DIRECTV's representative on the
Company's board of directors, resigned from the board. Soon thereafter, DIRECTV notified the Company that it sold its equity position in the Company so it
no longer held an equity position of 5% or more. Thus, the Company determined DIRECTV no longer met its definition of a related party relationship.
Therefore, the Company classified DIRECTV's activities from June 2004 forward as non-related party activities. The Company determined that no change to
DIRECTV's related party classification for prior periods was required as during that time DIRECTV was in a position to significantly influence the
Company's management and operation expenses.
Basis of Presentation
The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All inter-company accounts and
transactions have been eliminated in consolidation. Certain amounts in prior periods have been reclassified to conform to the current year presentation.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and
assumptions. Actual results could differ from those estimates.
Reclassifications
Certain reclassifications have been made to prior periods' financial statements to conform with the current period presentations. The Company
reclassified its auction rate securities from cash and cash equivalents to short-term investments by $19.1 million and $5.0 million for the fiscal years ended
January 31, 2005 and 2004, respectively.
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