TiVo 2005 Annual Report Download - page 73

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Table of Contents
The majority of the Company's customers for service revenues are concentrated in the United States. The Company is subject to a minimal amount of
credit risk related to these customers as service revenue is primarily obtained through credit card sales. DIRECTV represented approximately 14%, 12%, and
11% of net revenues and 24%, 13% and 16% of our net accounts receivable for the fiscal years ended January 31 2006, 2005, and 2004, respectively. The
Company sells its TiVo-enabled DVR to retailers under customary credit terms. One retailer generated 29%, 16%, and 20% of net revenues and 19%, 48%,
and 45% of the net accounts receivable for the fiscal years ended January 31, 2006, 2005, and 2004, respectively.
The Company evaluates its outstanding accounts receivable each period for collectibility. This evaluation involves assessing the aging of the amounts
due to the Company and reviewing the credit-worthiness of each customer. Based on this evaluation, the Company records an allowance for accounts
receivable that are estimated to not be collectible.
The Company is dependent on single suppliers for several key components and services. The Except for Tribune Media Services, the Company does
not have contracts or arrangements with its single suppliers. Instead, the Company purchases these components and services by submitting purchase orders
with these companies. The Company has an agreement with Tribune Media Services, its sole supplier of programming guide data for the TiVo service. If
these suppliers fail to perform their obligations, the Company may be unable to find alternative suppliers or deliver its products and services to its customers
on time, if at all.
Recent Accounting Pronouncements
In November 2004, FASB issued FASB Statement No. 151, "Inventory Costs-an Amendment of ARB No. 43, Chapter 4" (FAS 151). FAS 151 amends
ARB 43, Chapter 4, to clarify that abnormal amounts of idle facility expense, freight, handling costs, and wasted materials (spoilage) should be recognized as
current-period charges. In addition, this Statement requires that allocation of fixed production overheads to the costs of conversion be based on the normal
capacity of the production facilities. The provisions of this Statement are effective for inventory costs incurred during fiscal years beginning after June 15,
2005. The adoption of the provisions of FAS 151 is not expected to have a material impact on the Company's financial position or results of operations.
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 the Company's 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.
TiVo has decided to adopt the modified prospective method, described above, beginning in fiscal year 2007.
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