TiVo 2005 Annual Report Download - page 49

Table of Contents
On December 16, 2004, the FASB issued FASB Statement No. 123 (revised 2004), "Share-Based Payment," which is a revision of FASB Statement
No. 123, "Accounting for Stock Based Compensation." Statement 123(R) supersedes APB Opinion No. 25, "Accounting for Stock Issued to Employees," and
amends FASB Statement No. 95, "Statement of Cash Flows." Generally, the approach in Statement 123(R) is similar to the approach described in Statement
123. However, Statement 123(R) requires all share-based payments to employees, including grants of employee stock options, to be recognized in the
statement of operations based upon their fair values. Pro forma disclosure is no longer an alternative. In April 2005, the Securities and Exchange Commission
announced the adoption of a new rule that amends the effective date of Statement 123(R). The effective date of the new standard under these new rules for our
consolidated financial statements is February 1, 2006, with early adoption permitted.
Statement 123(R) permits public companies to adopt its requirements using one of two methods:
A "modified prospective" method in which compensation cost is recognized beginning with the effective date (a) based on the requirements of
Statement 123(R) for all share-based payments granted after the effective date; and (b) based on the requirements of Statement 123 for all awards granted to
employees prior to the effective date of Statement 123(R) that remain unvested on the effective date.
A "modified retrospective" method which includes the requirements of the modified prospective method described above, but also permits entities to
restate based on the amounts previously recognized under Statement 123 for purposes of pro forma disclosures either (a) all prior periods presented; or
(b) prior interim periods of the year of adoption.
We have decided to adopt the modified prospective method, described above, beginning in fiscal year 2007.
As permitted by Statement 123, we currently account for share-based payments to employees using the intrinsic value method and, as such, generally
recognize no compensation cost for employee stock options. Accordingly, the adoption of Statement 123(R)'s fair value method will have a significant impact
on our results of operations, although it will have no impact on our overall financial position based on our current share based awards to employees. The
impact of adoption of Statement 123(R) cannot be predicted at this time because it will depend on levels of share-based payments granted in the future, the
valuation model used to value the options and other variables. However, had we adopted Statement 123(R) in prior periods, the impact of that standard would
have approximated the impact of Statement 123 as described in the Stock Compensation disclosure included in Note 2 to our consolidated financial
statements.
Results of Operations
Net Revenues. Our net revenues for the fiscal years ended January 31, 2006, 2005, and 2004 as a percentage of total net revenues were as follows:
Fiscal Year Ended January 31,
2006 2005 2004
(In thousands, except percentages)
Service revenues $ 167,194 85% $ 107,166 62% $ 61,560 44%
Technology revenues 3,665 2% 8,310 5% 15,797 11%
Hardware revenues 72,093 37% 111,275 65% 72,882 52%
Rebates, revenue share, and other payments to channel (47,027) -24% (54,696) -32% (9,159) -6%
Net revenues $ 195,925 100% $ 172,055 100% $ 141,080 100%
Change from same prior-year period 14% 22% 47%
45